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0000813619-03-000042.txt : 20031223
0000813619-03-000042.hdr.sgml : 20031223
20031222193634
ACCESSION NUMBER: 0000813619-03-000042
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20031205
ITEM INFORMATION: Other events
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 20031223
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SOUTHWALL TECHNOLOGIES INC /DE/
CENTRAL INDEX KEY: 0000813619
STANDARD INDUSTRIAL CLASSIFICATION: UNSUPPORTED PLASTICS FILM & SHEET [3081]
IRS NUMBER: 942551470
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-15930
FILM NUMBER: 031069145
BUSINESS ADDRESS:
STREET 1: 1029 CORPORATION WAY
CITY: PALO ALTO
STATE: CA
ZIP: 94303
BUSINESS PHONE: 4159629111
8-K
1
body8-k.htm
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): December
18, 2003
Southwall Technologies Inc.
----------------------------------------------------------
- -------------
(Exact name of registrant as specified in its charter)
Delaware
---------------------------------------
(State of incorporation or organization)
0-15930 94-2551470
------------------------ -----------------
- ---
(Commission File Number) (I.R.S. Employer
Identification No.)
3975 East Bayshore Road, Palo Alto, California 94303
--------------------------------------------------------------
- ------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:
(650) 962-9111
----------------
Item 5. Other Events.
On December 19, 2003, Southwall Technologies Inc.
(`Southwall') issued a press release announcing that the previous day it had
entered into a new loan and security agreement with Pacific Business
Funding, a division of Cupertino National Bank, which is a
subsidiary of Greater Bay Bancorp (`PBF'), creating a $3,000,000 revolving line
of credit which will be guaranteed by Needham & Company, Inc. (`Needham').
Availability under the PBF line of credit is subject to the effectiveness of
Needham's guarantees. Southwall also announced that it had entered into an
investment agreement with Needham, certain affiliates of Needham and Dolphin
Direct Equity Partners, L.P. (`Dolphin') governing the terms of Needham's
guarantees and providing for the potential future purchase by Needham, certain
affiliates of Needham and Dolphin of up to an aggregate of 4,500,000 shares of
Southwall's newly created Series A convertible preferred stock at a price of
$1.00 per share.
Under the terms of the investment agreement, Needham will
issue the guarantees of Southwall's new line of credit facility in two separate
pieces of $2.25 million and $750,000, respectively, and Needham, certain
affiliates of Needham, and Dolphin will purchase the equity in two separate
tranches of $1.5 million and $3.0 million, respectively, following the
extensions of credit under the new facility. The new borrowings and the purchase
of each equity tranche are subject to certain conditions. These conditions
include, among other things, the receipt of concessions from creditors and
landlords, the completion of certain restructuring actions and the achievement
of cash flow break-even at quarterly revenue levels below those of third quarter
2003. There is no assurance that any of these conditions will be satisfied or
that any subsequent closings will occur.
On December 18, 2003, Needham executed a guarantee of up to
$2.25 million under the line of credit facility and received a warrant to
purchase 941,115 shares of Southwall's common stock, approximately 7.5% of
Southwall's total shares currently outstanding. The warrant, exercisable for
$0.01 per share, will expire five years from its issuance. Upon Needham's
guarantee of the remaining $750,000 under the line of credit, Needham will
receive an additional warrant to purchase 941,115 shares of common stock on the
same terms and conditions. Southwall may draw down on the line of credit up to
the amount of Needham's guarantees only if Needham provides a joint instruction
and the other conditions to borrowing are met.
The investment agreement provides that, following the
extensions of credit described above, Needham, certain affiliates of Needham,
and Dolphin would agree to purchase from Southwall, and Southwall would agree to
sell to them, an aggregate of 1,500,000 shares of the Series A preferred stock
at a price of $1.00 per share, upon the completion, in the purchasers'
reasonable discretion, of certain restructuring measures. The preferred stock
would be convertible on a one-for-one basis into Southwall common stock, have a
preference over the common stock in the event of a liquidation or winding up of
Southwall, and carry a cumulative dividend of 10% per annum along with other
protective and anti-dilution provisions. The approval of the holders of the
Series A preferred stock will be required for Southwall to take certain actions,
including the consummation of any merger or sale of the company or all or
substantially all of its assets. In connection with this purchase of
Southwall's preferred stock, the purchasers would receive additional five year
warrants to purchase a number of shares of Southwall's common stock equal to an
aggregate of 7.5% of the total shares outstanding, at a nominal exercise
price.
The investment agreement further provides that Needham,
certain affiliates of Needham, and Dolphin would agree to purchase from
Southwall, and Southwall would agree to sell to them, an additional 3,000,000
shares of the Series A preferred stock at a price of $1.00 per share upon
satisfaction, in the purchasers' reasonable discretion, of certain conditions.
These conditions include Southwall's having attained certain revenue levels for
the first quarter of 2004 from current business lines and the achieving of cash
flow break-even at quarterly revenue levels below third quarter 2003 levels. In
connection with this second purchase of Southwall's preferred stock, the
purchasers would receive additional warrants to purchase a number of shares of
Southwall's common stock equal to an aggregate of 6% of the total shares
outstanding, at a nominal exercise price. Southwall granted certain registration
rights to Needham, certain affiliates of Needham, and Dolphin with respect to
the shares issuable upon exercise of the warrants or conversion of the preferred
stock.
If all of the transactions contemplated by the investment
agreement are completed and if Needham and its affiliated entities were to
exercise all such warrants and convert all such shares of preferred stock, while
maintaining their current position of approximately 1,481,000 shares of common
stock, then the firm and its affiliated entities would own approximately
6,865,000 shares of Southwall common stock, or about 31% of the total shares
outstanding. Dolphin currently does not own any shares of common stock but upon
exercise of its warrants and conversion of its preferred stock would own
approximately 2,692,000 shares of Southwall common stock, or about 12% of the
total shares outstanding.
Under the investment agreement, Southwall is also required to
issue additional common stock warrants to Needham, certain affiliates of
Needham, and Dolphin to protect their ownership position if Southwall issues
debt or equity in connection with its restructuring efforts. It is unlikely
that Southwall will have enough authorized shares of common stock to cover all
of the foregoing issuances and if that is the case, Southwall will be required
to hold a shareholder meeting to obtain the consent of its shareholders to
increase the number of authorized shares of its common stock. There can be no
assurances that Southwall will not be sued by Needham, certain affiliates of
Needham, or Dolphin if it does not have enough authorized shares of common stock
to make the required issuances.
The PBF loan and security agreement expires on May 5, 2004. In connection
with the line of credit, Southwall granted to PBF a lien upon and security
interest in, and right of set off with respect to all of Southwall's interest in
all accounts receivable, inventory, monies, remittances and fixed assets.
Southwall and PBF have also entered into a Forbearance Agreement in which PBF
has agreed to forbear until May 5, 2004 from pursuing its remedies pursuant to
certain defaults by Southwall under a factoring line of credit previously
entered into between the parties. In exchange for the forbearance, Southwall
issued PBF a warrant to purchase 250,000 shares of common stock at an exercise
price of $0.01 per share. The warrant will expire five years from its issuance.
Southwall granted certain registration rights to PBF with respect to the shares
issuable upon exercise of the warrant.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits
99.1 Press Release, dated December 19, 2003, issued by Southwall
Technologies Inc.
99.2 Investment Agreement, dated December 18, 2003, by and among Southwall
Technologies Inc., Needham & Company, Inc., Needham Capital Partners
III, L.P., Needham Capital Partners IIIA, L.P., Needham Capital Partners III
(Bermuda), L.P., and Dolphin Direct Equity Partners, LP.
99.3 Registration Rights Agreement, dated December 18, 2003, by and among
Southwall Technologies Inc., Pacific Business Funding, Needham & Company,
Inc., Needham Capital Partners III, L.P., Needham Capital Partners IIIA,
L.P., Needham Capital Partners III (Bermuda), L.P., and Dolphin Direct Equity
Partners, LP.
99.4 Certificate of Designation, Preferences and Rights of Series A 10%
Cumulative Preferred Stock of Southwall Technologies Inc. filed with the
Secretary of State of Delaware on December 18, 2003.
99.5 Form of Warrant to purchase shares of Southwall's common stock.
99.6 Loan and Security Agreement, dated December 18, 2003, between
Southwall Technologies Inc. and Pacific Business Funding.
99.7 Forbearance Agreement, dated December 18, 2003, between Southwall
Technologies Inc. and Pacific Business Funding.
SIGNATURE
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 hereunto duly
authorized.
SOUTHWALL TECHNOLOGIES INC.
Date: December 22, 2003 By: /s/ Thomas G.
Hood____________
Thomas G. Hood
President and Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release, dated December 19, 2003, issued by Southwall
Technologies Inc.
99.2 Investment Agreement, dated December 18, 2003, by and among Southwall
Technologies Inc., Needham & Company, Inc., Needham Capital Partners
III, L.P., Needham Capital Partners IIIA, L.P., Needham Capital Partners III
(Bermuda), L.P., and Dolphin Direct Equity Partners, LP.
99.3 Registration Rights Agreement, dated December 18, 2003, by and among
Southwall Technologies Inc., Pacific Business Funding, Needham & Company,
Inc., Needham Capital Partners III, L.P., Needham Capital Partners IIIA,
L.P., Needham Capital Partners III (Bermuda), L.P., and Dolphin Direct Equity
Partners, LP.
99.4 Certificate of Designation, Preferences and Rights of Series A 10%
Cumulative Preferred Stock of Southwall Technologies Inc. filed with the
Secretary of State of Delaware on December 18, 2003.
99.5 Form of Warrant to purchase shares of Southwall's common stock.
99.6 Loan and Security Agreement, dated December 18, 2003, between
Southwall Technologies Inc. and Pacific Business Funding.
99.7 Forbearance Agreement, dated December 18, 2003, between Southwall
Technologies Inc. and Pacific Business Funding.
EX-99
4
exh99-3.htm
EXHIBIT 99.3
Southwall Technologies Inc.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this `Agreement') is made as
of December 18, 2003, by and among Southwall Technologies Inc., a Delaware
corporation (the `Company'), and the persons listed on the attached
Exhibit A (collectively, the `Investors').
RECITALS
- The Company and the Investors have either (i) entered into an investment
agreement of even date herewith (the `Investment Agreement') which
provides, among other things, for arrangements with one Investor guaranteeing
borrowings under the Company's new line of credit and the sale by the Company
and purchase by the other Investors of Series A Preferred Stock of the
Company or (ii) entered into a Loan and Security Agreement (the `Loan and
Security Agreement').
- The Company and the Investors wish to enter into this Agreement in order
(i) to provide for certain rights of the Investors, and (ii) to induce
the Investors to purchase shares of the Series A Preferred Stock or enter
into arrangements relating to the extension of credit, as the case may
be.
THE PARTIES AGREE AS FOLLOWS:
- Certain
Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
- `Board' shall mean the Board of Directors of the
Company.
- `Commission' shall mean the Securities
and Exchange Commission or any other federal agency at the time administering
the Securities Act.
- `Convertible Securities' shall mean the shares of
Series A Preferred Stock purchased by the Investors purchasing Series A
Preferred Stock pursuant to the Investment Agreement, the Warrants issued to the
Investors and/or the Warrants issued pursuant to the Loan and Security
Agreement.
- `Exchange Act' shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
- `Form S-3' shall mean Form S-3 issued by the
Commission or any substantially similar form then in
effect.
- `Holder' shall mean any holder of outstanding
Registrable Securities which have not been sold to the public, but only if such holder is one of the Investors or an assignee or
transferee of registration rights as permitted by
Section 10.
- `Initiating Holders' shall mean Holders who in the
aggregate hold at least 50% of the Registrable
Securities.
- `Material Adverse Event'
shall mean any change, event or effect that (a) is materially adverse to the
general affairs, business, operations, assets, condition (financial or
otherwise) or results of operations or prospects of the Company, or (b)
is reasonably foreseeable, has a reasonable likelihood of occurring, and if it
were to occur could reasonably be expected to materially adversely affect the
general affairs, business, operations, assets, condition (financial or
otherwise) or results of operations or prospects of the Company.
- The terms `Register,'
`Registered,' and `Registration' refer to a registration effected
by preparing and filing a registration statement on Form S-1, S-2, or S-3
in compliance with the Securities Act (`Registration Statement'), and the
declaration or ordering of the effectiveness of such Registration
Statement.
- `Registrable Securities' shall mean all Common Stock
not previously sold to the public and issued or issuable upon conversion or
exercise of any of the Company's Convertible Securities purchased by or issued
to the Investors, including Common Stock issued pursuant to stock splits, stock dividends, and similar distributions;
provided, however, that such shares of Common Stock as to which
any of the following apply shall cease to be Registrable Securities: (a) a
registration statement with respect to the sale of such Registrable Securities
shall have become effective under the Securities Act and such Registrable
Securities shall have been disposed of under such registration statement; (b)
such Registrable Securities shall have been transferred pursuant to Rule 144 or
any successor rule or provision promulgated under the Securities Act (`Rule
144'); (c) such Registrable Securities shall have been transferred in a
transaction in which the Investor's rights and obligations under this Agreement
were not assigned; (d) the holder of such Registrable Securities is then
permitted to sell all of such securities within any three-month period pursuant
to Rule 144 (and, with respect to any holder who is a registered broker/dealer,
counsel to such holder delivers a written opinion to such effect); or (e) the
termination of this Agreement.
- `Registration Expenses' shall mean all expenses
incurred by the Company in complying with Sections 4 and 6 of this
Agreement, including, without limitation, all federal and state registration,
qualification, and filing fees, printing expenses, fees and disbursements of
counsel for the Company and reasonable fees and disbursements of one special
counsel for all Holders,
blue sky fees and expenses, and the expense of any special audits incident to or
required by any such registration. Registration
Expenses shall not include Selling Expenses or fees and disbursements of counsel
for any underwriter of any Registrable Securities being registered.
- `Securities Act' shall mean the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
- `Selling Expenses' shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities pursuant to this Agreement.
- Demand
Registration.
- Request for Registration on Form
other than Form S-3.
Subject to the terms of this Agreement, in the event that the Company
shall receive from the Initiating Holders at any time after December 18, 2004 a written request that the
Company effect any Registration with respect to all or a part of the Registrable
Securities on a form other than Form S-3 for an offering of at least 40%
(which shall be at least an aggregate of 500,000 shares) of the then outstanding
Registrable Securities the Company shall (i) promptly give written notice
of the proposed Registration to all other Holders, and (ii) subject to
receipt of all necessary information from the Holders of such shares, as soon as
practicable, use commercially reasonable efforts to effect Registration of the
Registrable Securities specified in such request, together with any Registrable
Securities of any Holder joining in such request as are specified in a written
request given within 20 days after written notice
from the Company. The Company shall not be obligated to take any action to
effect any such registration after the Company has effected three such
Registrations pursuant to this Section 2.1 and such Registrations have been
declared effective.
- Request for Registration on Form S-
3. Any time after December 18,
2004, if the Initiating Holders request that the Company file a Registration
Statement on Form S-3 (or any successor form to Form S-3) for a public
offering of shares of Registrable Securities the reasonably anticipated
aggregate price to the public of which, net of Selling Expenses, would not be
less than $1,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities
for such an offering, the Company shall use all reasonable efforts to effect
Registration of the Registrable Securities on such form; provided, however, that
the Company shall not be required to effect more than one Registration pursuant
to this Section 2.2 in any 12 month period. The
substantive provisions of Section 2.5 shall be applicable to each
Registration initiated under this
Section 2.2.
- Right of Deferral.
Notwithstanding the foregoing, the Company shall not be obligated to file
a registration statement pursuant to this Section 2 if
the Company shall furnish to such Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board it would be
seriously detrimental to the Company or its stockholders for a Registration
Statement to be filed in the near future, then the Company's obligation to use
all reasonable efforts to file a Registration Statement shall be deferred for a
period not to exceed 90 days from the receipt of the request to file such
registration by such Holder; provided, however, that the Company shall not
exercise the right contained in this subsection 2.3 more than once in any 12
month period.
- Registration of Other
Securities in Demand Registration.
Any Registration Statement filed pursuant to the request of the
Initiating Holders under this Section 2 may, subject to the provisions of
Section 2.5, include securities of the Company other than Registrable
Securities.
- Underwriting in Demand
Registration.
- Notice of Underwriting. If
the Initiating Holders intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 2, and the Company
shall include such information in the written notice referred to in
Sections 2.1 and 2.3. The right of any Holder to Registration pursuant to
Section 2 shall be conditioned upon such Holder's agreement to participate in
such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting.
- Selection of Underwriter in Demand
Registration. The Company
shall (together with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement with the
representative (`Underwriter's Representative') of the underwriter or
underwriters selected for such underwriting by the Holders of a majority of the
Registrable Securities being registered by the Initiating Holders and agreed to
by the Company.
- Marketing Limitation in Demand
Registration. If the
Underwriter's Representative advises the Initiating Holders in writing that
market factors (including, without limitation, the aggregate number of shares of
Common Stock requested to be Registered, the general condition of the market,
and the status of the persons proposing to sell securities pursuant to the
Registration) require a limitation of the number of shares to be underwritten,
then (i) first, the Common Stock (other than Registrable Securities) held
by officers or directors of the Company, (ii) second, the securities other
than Registrable Securities, and (iii) third, the securities requested to
be registered by the Company, shall be excluded from such Registration to the
extent required by such limitation. If a limitation of the number of shares is
still required, the Initiating Holders shall so advise all Holders and the
number of shares of Registrable Securities that may be included in the
Registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities entitled to inclusion in such Registration held by such Holders at
the time of filing the Registration Statement. No Registrable Securities or
other securities excluded from the underwriting by reason of this
Section 2.5(c) shall be included in such Registration
Statement.
- Right of Withdrawal in Demand
Registration. If any Holder
of Registrable Securities, or a holder of other securities entitled (upon
request) to be included in such Registration, disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the Underwriter's Representative and the Initiating Holders
delivered at least fifteen days prior to the effective date of the Registration
Statement. The securities so withdrawn shall also be withdrawn from the
Registration Statement.
- Piggyback
Registration.
- Notice of Piggyback Registration
and Inclusion of Registrable Securities. Subject to the terms of this Agreement, if the Company
decides to Register any of its Common Stock (either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights) on a form that would be suitable for a registration
involving solely Registrable Securities, the Company shall: (i) promptly
give each Holder written notice thereof (which shall include a list of the
jurisdictions in which the Company intends to attempt to qualify such securities
under the applicable Blue
Sky or other state securities laws), and (ii) include in such Registration
(and any related qualification under Blue Sky laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities specified in a
written request delivered to the Company by any Holder within 15 days after
delivery of such written notice from the Company.
- Underwriting in Piggyback
Registration.
- Notice of Underwriting in Piggyback
Registration. If the
Registration of which the Company gives notice is for a Registered public
offering involving an underwriting, the Company shall so advise the Holders as a
part of the written notice given pursuant to Section 3.1. In such event,
the right of any Holder to Registration shall be conditioned upon such
underwriting and the inclusion of such Holder's Registrable Securities in such
underwriting to the extent provided in this Section 3. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement with the Underwriter's
Representative for such offering. The Holders shall have no right to participate
in the selection of the underwriters for an offering pursuant to this Section
3.
- Marketing Limitation in Piggyback
Registration
. If the
Underwriter's Representative advises the Holders seeking registration of
Registrable Securities pursuant to this Section 3 in writing that market factors
(including, without limitation, the aggregate number
of shares of Common Stock requested to be Registered, the general condition of
the market, and the status of the persons proposing to sell securities pursuant
to the Registration) require a limitation of the number of shares to be
underwritten, the Underwriter's Representative (subject to the allocation
priority set forth in Section 3.2(c)) may limit the number of shares of Registrable
Securities to be included in such Registration and
underwriting to not less than 20% of the securities included in such
Registration.
- Allocation of Shares in Piggyback
Registration. If the
Underwriter's Representative limits the number of shares to be included in a
Registration pursuant to Section 3.2(b), the number of shares to be
included in such Registration shall be allocated (subject to Section 3.2(b)) in
the following manner: The shares (other than Registrable Securities) held by officers
or directors of the Company shall be excluded from such registration and
underwriting to the extent required by such limitation. If a limitation of the
number of shares is still required after such exclusion, the number of shares
that may be included in the Registration and underwriting by selling
stockholders shall be allocated among all other Holders thereof and other
holders of securities (other than Registrable Securities) requesting and legally
entitled to include such securities in such Registration, in proportion, as
nearly as practicable, to the respective amounts of securities (including
Registrable Securities) which such Holders and such other holders would
otherwise be entitled to include in such Registration. No Registrable Securities
or other securities excluded from the underwriting by reason of this
Section 3.2(c) shall be included in the Registration
Statement.
- Withdrawal in Piggyback
Registration. If any Holder
disapproves of the terms of any such underwriting, such person may elect to
withdraw therefrom by written notice to the Company and the Underwriter's
Representative delivered at least fifteen days prior to the effective date of
the Registration Statement. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
Registration. The Company shall have the right to postpone or
withdraw any Registration effected pursuant to this Section 3.2 without
obligation to any Holder.
- Expenses of
Registration. All
Registration Expenses incurred in connection with two Registrations pursuant to
Section 2.1, three Registrations pursuant to Section 2.2 and
unlimited Registrations pursuant to Section 3, shall be borne by the
Company. All Registration Expenses incurred in connection with any other Registration, qualification, or compliance, shall be
apportioned among the Holders and other holders of the securities so registered
on the basis of the number of shares so registered. Notwithstanding the above,
the Company shall not be required to pay for any expenses of any Registration
proceeding begun pursuant to Section 2 if the Registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (which Holders shall bear such
expenses), unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand Registration pursuant to Section 2;
provided further, however, that if at the time of such withdrawal, the Holders
have learned of a Material Adverse Event not known to the Holders at the time of
their request, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 2. All Selling
Expenses shall be borne by the holders of the securities Registered pro rata on
the basis of the number of shares Registered.
- Termination of Registration
Rights. The rights
to cause the Company to register securities granted under Sections 2 and 3
of this Agreement and to receive notices pursuant to Section 3 of this
Agreement shall terminate, with respect to each Holder, if such Holder is
eligible to sell all of such Holder's Registrable Securities within a three-
month period under Rule 144 of the Securities Act.
- Registration Procedures and
Obligations.
Whenever required under this Agreement to effect the registration
of any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
- Prepare and file with the
Commission a Registration Statement with respect to such Registrable Securities
and use its reasonable efforts to cause such Registration Statement to become
effective, and, upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such Registration Statement effective
until the expiration of 12 months after such Registration Statement first
becomes effective, or, if sooner, such time as all shares so Registered have
been sold.
- Prepare and file, as expeditiously as reasonably practicable, with the
Commission such amendments and supplements to such Registration Statement and
the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Registration Statement;
provided that, if the filing of any such amendment or supplement would cause the
disclosure of material non-public information concerning the Company, the
disclosure of which at the time is not, in the good faith opinion of the Board,
in the best interests of the Company, such filing shall not be made until the
Board in good faith determines.
- Furnish to the Holders such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them; provided
that the obligation of the Company to deliver copies of prospectuses or other
documents to each Holder shall be subject to the receipt by the Company of
reasonable assurances from such Holder that such Holder will comply with the
applicable provisions of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with the use of any such prospectus
or other documents.
- Use its reasonable efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business in any jurisdiction where it is not so qualified, to
subject itself to taxation in any such jurisdiction or to file a general consent
to service of process in any such states or jurisdictions, and provided,
further, that in the event any jurisdiction in which the securities shall be
qualified imposes a non-waivable requirement that expenses incurred in
connection with the qualification of the securities be borne by selling
stockholders, such expenses shall be payable pro rata by selling
stockholders.
- In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
- Notify each Holder of Registrable Securities covered by such Registration
Statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances in which they were made.
- Provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such Registration Statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
- Furnish, at the request of any Holder requesting registration of Registrable
Securities pursuant to this Agreement, on the date that such Registrable
Securities are delivered for sale in connection with a registration pursuant to
this Agreement, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters (with a copy provided to each
holder of Registrable Securities) in an underwritten public offering, and
(ii) a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters (with a copy provided to each
holder of Registrable Securities).
- Use all reasonable efforts to list the Registrable Securities covered by
such registration statement with NASDAQ or any securities exchange on which the
Common Stock of the Company is then listed, or NASDAQ or such securities
exchange as shall be selected by the Company, or, if the Company fails to make
an application to so list within 30 days of a request for the same by the
Investors in connection with a Registered public offering involving an
underwriting, the Investors may determine the place of listing, subject to
qualification by the Company to list its shares thereon.
- Notify each seller of Registrable Securities under such registration
statement of (i) the effectiveness of such registration statement,
(ii) the filing of any post-effective amendments to such registration
statement, or (iii) the filing of a supplement to such registration
statement.
- Make available for inspection upon reasonable notice during the Company's
regular business hours by each seller of Registrable Securities, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant, or other agent retained by such seller or underwriter,
all material financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant, or agent in connection with such registration
statement; provided that the Company shall not be required to disclose any
confidential information or to meet with any seller or its representatives until
and unless the seller and/or such representative shall have entered into a
confidentiality agreement with the Company in form and substance reasonably
satisfactory to the Company.
- Information Furnished by Holder
. It shall be a condition precedent of the
Company's obligations under this Agreement that each Holder of Registrable
Securities included in any Registration furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder or Holders as
the Company may reasonably request.
- Indemnification.
- Company's Indemnification of
Holders. To the extent
permitted by law, the Company shall indemnify each Holder, each of its officers,
directors, and constituent partners, legal counsel for the Holders, and each
person controlling such Holder, with respect to which Registration,
qualification, or compliance of Registrable Securities has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter against all claims, losses, damages, liabilities, or
actions in respect thereof (collectively, `Damages') to the extent such
Damages arise out of or are based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus (including any related
Registration Statement) incident to any such Registration, qualification, or
compliance, or are based on any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made, or any violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such Registration, qualification,
or compliance; and the Company shall reimburse each
such Holder, each such underwriter, and each person who controls any such Holder
or underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action; provided, however, that the indemnity contained in this
Section 8.1 shall not apply to amounts paid in settlement of any such
Damages if settlement is effected without the consent of the Company (which
consent shall not unreasonably be withheld); and provided, further, that the
Company shall not be liable in any such case (a) to the extent that any
such Damages arise out of or are based upon any untrue statement or omission
based upon written information furnished to the Company by such Holder,
underwriter, or controlling person and stated to be for use in connection with
the offering of securities of the Company or (b) in connection with the
failure by the Holder to deliver in connection with any sale or sales by the
Holder a subsequent prospectus, amendment or supplement that corrects any
statement or omission in any prospectus if such subsequent prospectus,
supplement or amendment was delivered to the Holder prior to such
sale.
- Holder's Indemnification of
Company. To the extent
permitted by law, each Holder shall, if Registrable Securities held by such
Holder are included in the securities as to which such Registration,
qualification or, compliance is being effected pursuant to this Agreement, indemnify the Company, each of its employees,
directors and officers, each legal counsel and independent accountant of the
Company, each underwriter, if any, of the Company's securities covered by such a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act, and each other
such Holder, each of its officers, directors, and constituent partners, and each
person controlling such other Holder, against all Damages arising out of or
based upon (a) any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (b) any violation by such Holder of any rule or regulation
promulgated under the Securities Act applicable to such Holder and relating to
action or inaction required of such Holder in connection with any such
Registration, qualification, or compliance including, but not limited to,
failure by the Holder to deliver in connection with any sale or sales by the
Holder a subsequent prospectus, amendment or supplement that corrects any
statement or omission in any prospectus if such subsequent prospectus,
supplement or amendment was delivered to the Holder prior to such sale, and
shall reimburse the Company, such Holders, such employees, directors, officers,
partners, persons, law and accounting firms, underwriters, or control persons
for any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or action;
provided, however, in the case of a situation set forth in Section 8.2(a),
to the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such Registration
Statement, prospectus, offering circular, or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use in connection with the offering of
securities of the Company; provided, further, that the indemnity contained in
this Section 8.2 shall not apply to amounts paid in settlement of any such
Damages if settlement is effected without the consent of such Holder (which consent shall not be
unreasonably withheld); and provided, further, that each Holder's liability
under this Section 8.2 shall not exceed such Holder's proceeds from the
offering of securities made in connection with such
Registration.
- Indemnification
Procedure. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement thereof and
generally summarize such action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim; provided, however, that
the indemnifying party shall be entitled to select counsel for the defense of
such claim with the approval of any parties entitled to indemnification, which
approval shall not be unreasonably withheld; provided further, however, that if
either party reasonably determines that there may be a conflict between the
position of the Company and the Investors in conducting the defense of such
action, suit, or proceeding by reason of recognized claims for indemnity under
this Section 8, then counsel for such party shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be necessary
to protect the interest of such party. The failure
to notify an indemnifying party promptly of the commencement of any such action,
if prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party, to the extent so prejudiced, of any
liability to the indemnified party under this Section 8, but the omission
so to notify the indemnifying party shall not relieve
such party of any liability that such party may have to any indemnified party
otherwise than under this Section 8.
- Contribution. If the indemnification provided for in this
Section 8 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any Damages referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a result of such
Damages in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such Damages as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
- Conflicts
. Notwithstanding the
foregoing, to the extent that the provisions on indemnification and contribution
contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
- Survival of Obligations
. The
obligations of the Company and Holders under this Section 8 shall survive
the completion of any offering of Registrable Securities in a registration
statement under this Agreement or otherwise.
- Limitations on Registration
Rights Granted to Other Securities. From and after the
date of this Agreement, the Company shall not enter into any agreement with any holder or
prospective holder of any securities of the Company providing for the granting
to such holder of any Registration rights.
- Transfer of
Rights. The right
to cause the Company to Register securities under this Agreement may be assigned
by any Holder to a transferee or assignee of at least 500,000 shares of
Registrable Securities (or Convertible Securities convertible into at least
500,000 shares of Registrable Securities) not sold to the public (i) the Company must receive written notice prior
to the time of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such rights are
being assigned, and (ii) such transferee or assignee must agree to be bound
by the terms and conditions of this Agreement. Notwithstanding the limitation
set forth in the foregoing sentence respecting the minimum number of shares
which must be transferred, any Holder which is a partnership or limited
liability company may transfer such Holder's Registration rights to such
Holder's constituent partners or members, as the case may be, without
restriction as to the number or percentage of shares acquired by any such
constituent partner or member.
- No-Action Letter or Opinion
of Counsel in Lieu of Registration; Conversion of Preferred
Stock.
Notwithstanding anything else in this Agreement, if the Company
shall have obtained from the Commission a `no-action' letter in which the
Commission has indicated that it shall take no action if, without Registration
under the Securities Act, any Holder disposes of Registrable Securities covered
by any request for Registration made under this Section 11 in the specific
manner in which such Holder proposes to dispose of the Registrable Securities
included in such request (such as including, without limitation, inclusion of
such Registrable Securities in an underwriting initiated by either the Company
or the Holders) and that such Registrable Securities may be sold to the public
without Registration, or if in the opinion of counsel for the Company concurred
in by counsel for such Holder, which concurrence shall not be unreasonably
withheld, no Registration under the Securities Act is required in connection
with such disposition and that such Registrable Securities may be sold to the
public without Registration, the Registrable Securities included in such request
shall not be eligible for Registration under this Agreement; provided, however,
that any Registrable Securities not so disposed of shall be eligible for
Registration in accordance with the terms of this
Agreement with respect to other proposed dispositions to which this
Section 11 does not apply. The Registration rights of the Holders of the
Registrable Securities set forth in this Agreement are conditioned upon the
conversion of the Registrable Securities with respect to which registration is
sought into Common Stock prior to the effective date of the Registration
Statement.
- Certain Events. In
the event: (i) of any request by the Commission or any other federal or state
governmental authority during the period of effectiveness of any Registration
Statement for amendments or supplements to a Registration Statement or related
prospectus or for additional information; (ii) of the issuance by the Commission
or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
proceedings for that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceedings for such
purpose; or (iv) of any event or circumstance that necessitates the making of
changes in the Registration Statement or prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of a prospectus, it will not contain any untrue statement of a material
fact or any omission to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; then the Company shall deliver, upon a
resolution of the Board, a certificate in writing to each Holder (a `Suspension
Notice') to the effect of the foregoing and detailing the facts and
circumstances related to the foregoing and, upon receipt of such Suspension
Notice, each Holder will refrain from selling any Registrable Securities
pursuant to a Registration Statement (a `Suspension') until the Holder's receipt
of copies of a supplemented or amended prospectus prepared and filed with the
Commission by the Company, or until it is advised in writing by the Company that
the current prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such prospectus. In the event of any Suspension, the Company shall use
commercially reasonable efforts to cause the use of the prospectus so suspended
to be resumed as soon as reasonably practicable, provided that, if such use
would cause the disclosure of material non-public information concerning the
Company, the disclosure of which at the time is not, in the good faith opinion
of the Board, in the best interests of the Company, such Suspension shall be
continued until the Board in good faith determines.
- Reports under the Exchange Act
.
With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Securities Act and any other rule or
regulation of the Commission that may at any time permit a Holder to sell securities of the Company to the public without
Registration or pursuant to a registration on Form S-3, the Company agrees
to:
- use
commercially reasonable efforts to make and keep public information available,
as those terms are understood and defined in Rule 144, at all times after
90 days after the effective date of the first Registration Statement filed by
the Company for the offering of its securities to the
public;
- use
commercially reasonable efforts to enable the Holders to utilize Form S-3
for the sale of their Registrable Securities, such action to be taken as soon
as reasonably practicable after the end of the
fiscal year in which the first Registration Statement filed by the Company for
the offering of its securities to the general public is declared
effective;
- use
commercially reasonable efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
- furnish to
any Holder, so long as the Holder owns any Registrable Securities, promptly upon
request (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144 (at any time after 90 days after the
effective date of the first Registration Statement filed by the Company), the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the Commission which permits the selling of
any such securities without Registration or pursuant to such
form.
- Stand-Off Agreement.
Each Holder, if requested by the Company and the managing underwriter of a
Registration, hereby agrees not to sell publicly or otherwise transfer or
dispose of any Registrable Securities or other securities of the Company held by
such Holder for a specified period of time (not to exceed 180 days) following
the effective date of such Registration Statement; provided that all executive
officers, directors and 5% or more stockholders of the Company enter into
similar agreements.
- Miscellaneous.
- Governing
Law
. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New York, excluding those laws that direct the
application of the laws of another jurisdiction.
- Headings. The headings of the sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
- Notices. Any notice required or permitted hereunder shall be
given in writing and shall be conclusively deemed effectively given upon
personal delivery or delivery by courier, or on the first business day after
transmission if sent by confirmed facsimile transmission, or five days after
deposit in the United States mail, by registered or certified mail, postage
prepaid, addressed (i) if to the Company, as set forth below the Company's
name on the signature page of this Agreement, and (ii) if to an Investor,
at such Investor's address as set forth below such Investor's name on the
signatures pages of this Agreement, or at such other address as the Company or
an Investor may designate by 10 days' advance written notice to the other
parties hereto.
- Amendment of Agreement. Any provision of this Agreement may be amended only by a
written instrument signed by the Company and by persons holding a majority of
the Registrable Securities (calculated on an as-converted
basis).
- Severability. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
- Entire Agreement; Successors
and Assigns. This Agreement
constitutes the entire agreement among the parties with regard to the subject
matter hereof and supercedes any and all prior negotiations, correspondence,
understandings and agreements among the parties regarding the subject matter
hereof. Subject to the exceptions specifically set forth in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective executors, administrators, heirs, successor, and
assigns of the parties.
- Counterparts
. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights
Agreement as of the date first above written.
Company: Southwall Technologies Inc.
a Delaware corporation
By:
Thomas G. Hood
Chief Executive Officer
Address:
Investors: Needham & Company, Inc.
By:
Name:
Title:
Address:
Needham Capital Partners III,
L.P.
By:
Name:
Title: Authorized Signatory
Address:
Needham Capital Partners IIIA,
L.P.
By:
Name:
Title: Authorized Signatory
Address:
Needham Capital Partners III
(Bermuda), L.P.
By:
Name:
Title: Authorized Signatory
Address:
Dolphin Direct Equity Partners,
LP
By:
Name:
Title: Authorized Signatory
Address:
Pacific Business Funding, A division of
Cupertino National Bank
By:
Name:
Title: Authorized Signatory
Address:
Exhibit A
SCHEDULE OF INVESTORS
Needham & Company
Needham Capital Partners III, L.P.
Needham Capital Partners IIIA, L.P.
Needham Capital Partners III (Bermuda), L.P.
Dolphin Direct Equity Partners, LP
Pacific Business Funding, a division of Cupertino National
Bank
_________________________________________________________________
_______
_________________________________________________________________
_______
Southwall Technologies Inc.
REGISTRATION RIGHTS AGREEMENT
_________________________________________________________________
_______
_________________________________________________________________
_______
December 18, 2003
()
EX-99
5
exh99-4.htm
EXHIBIT 99.4
Certificate of Designation, Preferences and Rights of Series A
10% Cumulative Preferred Stock of Southwall Technologies Inc.
SOUTHWALL TECHNOLOGIES INC. (the
`Company'), a corporation organized and existing under the General
Corporation Law of the State of Delaware, does hereby certify that, pursuant to
the authority conferred upon the Board of Directors of the Company by the
Certificate of Incorporation of the Company and pursuant to Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Company, at a meeting duly held on December 18, 2003, duly adopted resolutions
authorizing a series of the Company's previously authorized Preferred Stock, par
value $0.001 per share, with the following preferences and rights:
1. Designation, Amount and Par
Value. The Series of Preferred Stock shall be designated the Series A
10% Cumulative Convertible Preferred Stock (the `Series A Preferred
Stock'), and the number of shares so designated shall be 4,500,000. The par
value of each share of Series A Preferred Stock shall be $0.001. Each share of
Series A Preferred Stock shall have a stated value of $1.00 per share (the
`Stated Value').
2. Dividends.
(a) Accrual. Holders of Series A Preferred
Stock shall be entitled to receive and the Company shall pay, when, as and if
declared by the Board of Directors out of funds legally available therefor,
cumulative cash dividends at the rate per share (as a percentage of the Stated
Value per share) equal to 10% per annum, payable quarterly in arrears on each
March 31, June 30, September 30 and December 31 (each, a `Dividend Payment
Date') and on the Conversion Date (as herein defined). Dividends on the
Series A Preferred Stock shall accrue daily commencing on the Original Issue
Date (as defined in Section 8) and shall be deemed to accrue whether or not
earned or declared and whether or not there are profits, surplus or other funds
of the Company legally available for the payment of dividends. The person that
is shown on the Company's records as the holder of the Series A Preferred Stock
on an applicable record date (the `Holder') for any dividend payment 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 Series A Preferred Stock subsequent to the
applicable record date but prior to the applicable Dividend Payment Date. Except
as otherwise provided herein, if at any time the Company pays less than the
total amount of dividends then accrued on the Series A Preferred Stock, such
payment shall be distributed ratably among the Holders of the Series A Preferred
Stock based upon the number of shares held by each Holder.
(b) Restrictions on Company. So long as
any Series A Preferred Stock shall remain outstanding, unless all accrued
dividends payable on the Series A Preferred Stock for all prior Dividend Payment
Dates shall have been paid, neither the Company nor any subsidiary thereof shall
redeem, purchase or otherwise acquire, directly or indirectly, any Common Stock
(as defined in Section 5) or any shares of any other capital stock of the
Company, ranking junior to the Series A Preferred Stock in respect of dividends
or liquidation preference, except the repurchase of shares of capital stock of
the Company held by officers, directors or employees or former officers,
directors or employees (or their estates or beneficiaries), upon death,
disability, retirement, severance or termination of employment, or in order to
satisfy tax withholding obligations of such persons upon the exercise of options
or the vesting of performance shares or pursuant to any agreement under which
such shares were issued, nor shall the Company directly or indirectly pay or
declare any cash dividend or make any cash distribution (other than a dividend
or distribution described in Section 5) upon, nor shall any cash distribution be
made in respect of, any Common Stock or any other capital stock of the Company
ranking junior to the Series A Preferred Stock in respect of dividends or
liquidation preference, nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any Common Stock
or any shares of any other capital stock of the Company, ranking junior to the
Series A Preferred Stock in respect of dividends or liquidation preference,
except as described above.
3. Voting Rights. Except as otherwise
expressly provided herein or as provided by law, the Series A Preferred Stock
shall have no voting rights.
4. Liquidation. Upon any (i)
liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary, (ii) the sale, lease, assignment, transfer, conveyance or disposal
of all or substantially all of the assets of the Company, or (iii) the
acquisition of the Company by another entity by means of consolidation,
corporate reorganization, merger or other transaction or series of related
transactions in which the stockholders of the Company immediately prior to such
transaction do not own at least 50% of the outstanding voting securities of the
successor entity, (a `Liquidation Event'), the Holders of shares of
Series A Preferred Stock shall be entitled to receive out of the assets of the
Company, whether such assets are capital or surplus, for each share of Series A
Preferred Stock an amount equal to the Stated Value, plus an amount equal to the
then-accrued but unpaid dividends per share, whether declared or not, but
without interest (`Liquidation Preference'), before any distribution or
payment shall be made to the holders of Common Stock or any other capital stock
of the Company junior in respect of distribution of assets, and if the assets of
the Company shall be insufficient to pay in full such amounts, then the entire
assets to be distributed shall be distributed among the Holders of Series A
Preferred Stock ratably in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in full. The
Company shall mail written notice of any such Liquidation, not less than 30 days
prior to the payment date stated therein, to each record Holder of Series A
Preferred Stock.
5. Conversion.
(a) Right to Convert. Each Holder of the
Series A Preferred Stock shall have the right at any time and from time to time,
at the option of such Holder, to convert any or all Series A Preferred Stock
held by such Holder, into such number of fully paid, validly issued and
nonassessable shares of common stock, par value $0.001 per share, of the Company
(`Common Stock'), free and clear of any liens, claims or encumbrances
created by the Company, as is determined by dividing (i) the Liquidation
Preference times the number of shares of Series A Preferred Stock being
converted (`Conversion Amount'), by (ii) the applicable Conversion Price
(determined as hereinafter provided) in effect on the Conversion Date.
Immediately following such conversion, the rights of the Holders of converted
Series A Preferred Stock shall cease and the persons entitled to receive the
Common Stock upon the conversion of Series A Preferred Stock shall be treated
for all purposes as then having become the owners of such Common Stock. If the
Per Share Market Value of the Company's Common Stock is $4.00 or more per share
for 30 consecutive days, all of the remaining shares of Series A Preferred Stock
then outstanding shall be converted into the number of shares of Common Stock
into which such shares of Series A Preferred Stock are then convertible pursuant
to this Section 5. All Holders of record of shares of Series A Preferred Stock
will be given at least 20 days' prior written notice of the date fixed and the
place designated for mandatory conversion of all such shares of Series A
Preferred Stock pursuant to this Section 5(a). On or before the date fixed
for conversion, each Holder of shares of Series A Preferred Stock shall
surrender such Holder's certificate or certificates for all such shares to the
Company or its transfer agent at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Common Stock to
which such Holder is entitled pursuant to this Section 5(a). As soon as
reasonably practicable after the date of such mandatory conversion and the
surrender of the certificate of certificates for Series A Preferred Stock,
the Company shall cause to be issued and delivered to such Holder, or on such
Holder's written order, a certificate or certificates for the number of full
shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Section 5(h) in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
(b) Mechanics of Conversion. To
convert Series A Preferred Stock into Common Stock, the Holder shall give
written notice (`Conversion Notice') to the Company (which Conversion
Notice may be given by facsimile transmission no later than the Conversion Date)
stating that such Holder elects to convert the same and shall state therein the
number of shares of Series A Preferred Stock to be converted and the name or
names in which such Holder wishes the certificate or certificates for Common
Stock to be issued (the conversion date specified in such Conversion Notice
shall be referred to herein as the `Conversion Date'). As soon as
possible after delivery of the Conversion Notice, such Holder shall surrender
the certificate or certificates representing the Series A Preferred Stock being
converted, duly endorsed, at the office of the Company or, if identified in
writing to such Holder by the Company, at the offices of any transfer agent for
the Series A Preferred Stock. The Company shall, upon receipt of such Conversion
Notice, issue and deliver to or upon the order of such Holder, against delivery
of the certificates representing the Series A Preferred Stock which have been
converted, a certificate or certificates for the number of shares of Common
Stock to which such Holder shall be entitled (with the number of and
denomination of such certificates designated by such Holder), and the Company
shall immediately issue and deliver to such Holder a certificate or certificates
for the number of shares of Series A Preferred Stock (including any fractional
shares) which such Holder has not yet elected to convert hereunder but which are
evidenced in part by the certificate(s) delivered to the Company in connection
with such Conversion Notice. The Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless certificates evidencing such shares of the Series A Preferred Stock being
converted are either delivered to the Company or its transfer agent or the
Holder notifies the Company or any such transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion of Series A Preferred
Stock, provided the Company's transfer agent is participating in the Depository
Trust Company (`DTC') Fast Automated Securities Transfer program, upon
request of the Holder, the Company shall use reasonable commercial efforts to
cause its transfer agent to electronically transmit the Common Stock issuable
upon conversion to the Holder, by crediting the account of the Holder's prime
broker with DTC through its Deposit Withdrawal Agent Commission (`DWAC')
system. The parties agree to coordinate with DTC to accomplish this
objective.
The conversion pursuant to this Section 5 shall be
deemed to have been made immediately prior to the close of business on the
Conversion Date. The person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock at the close of business on the
Conversion Date. The Company's obligation to issue Common Stock upon conversion
of Series A Preferred Stock shall, except with respect to the Holder's
compliance with the notice and delivery requirements set forth above in this
Section 5(b), be absolute, is independent of any covenant of the Holder of
Series A Preferred Stock, and shall not be subject to: (i) any offset or
defense, or (ii) any claims against the Holders of Series A Preferred Stock
whether pursuant to this Certificate of Designation, the Investment Agreement
(as defined in Section 7) or otherwise. In the event that the Company disputes
the Holder's computation of the number of shares of Common Stock to be received,
then the Company shall deliver to the Holder the number of shares of Common
Stock not in dispute and shall seek to mutually agree with the Holder in good
faith on the correct number of shares to be received.
(c) Determination of Conversion Price.
The Conversion Price applicable with respect to the Series A Preferred Stock
(the `Conversion Price'), subject to the adjustments set forth below,
shall be $1.00 per share.
(d) Stock Splits; Dividends;
Adjustments.
(i) If the Company, at any time while the Series
A Preferred Stock is outstanding, (A) pays a stock dividend or otherwise makes a
distribution or distributions on any equity securities (including instruments or
securities convertible into or exchangeable for such equity securities) in
shares of Common Stock, (B) subdivides outstanding Common Stock into a larger
number of shares, or (C) combines outstanding Common Stock into a smaller number
of shares, then the Conversion Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately before such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to this Section 5(d)(i) shall become effective
immediately after the paying or making of such dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision or combination.
(ii) In the event that the Company issues or
sells any Common Stock or securities which are convertible into or exchangeable
for its Common Stock (other than the Series A Preferred Stock), or any warrants
or other rights to subscribe for or to purchase or any options for the purchase
of its Common Stock (`Convertible Securities') (other than shares or
options issued or which may be issued pursuant to (A) the Company's current or
future employee, consultant or director stock incentive or option plans or
shares issued upon exercise of options, warrants or rights outstanding on the
date of the Investment Agreement (as defined herein), (B) arrangements with the
Holders of Series A Preferred Stock, (C) upon the conversion of the Series A
Preferred Stock) or (D) transactions for which certain stockholders of the
Company will be entitled to receive Common Stock or Convertible Securities under
Section 4.14 of the Investment Agreement (`Exempted Issuances') at an
effective purchase price per share which is less than the Per Share Market Value
(as defined in Section 8) of the Common Stock on the Trading Day next preceding
such issue or sale or, in the case of issuances to holders of its Common Stock,
the record date fixed for the determination of stockholders entitled to receive
Common Stock or Convertible Securities (the `Fair Market Price') (such
shares of Common Stock or Convertible Securities, the `Dilutive
Securities'), the Conversion Price in effect immediately prior to such issue
or sale or record date, as applicable, shall be reduced effective concurrently
with such issue or sale to an amount determined by multiplying the Conversion
Price then in effect by a fraction, (1) the numerator of which shall be the sum
of (x) the number of shares of Common Stock outstanding immediately prior to
such issue or sale and (y) the number of shares of Common Stock which the
aggregate consideration received by the Company for such Dilutive Securities
would purchase at the Fair Market Price, and (2) the denominator of which shall
be the number of shares of Common Stock of the Company and the Dilutive
Securities outstanding immediately after such issue or sale.
For the purposes of the foregoing adjustment, shares of
Common Stock owned by or held on account of the Company or any subsidiary shall
not be deemed outstanding for the purpose of any such computation. In addition,
for the purposes of the foregoing adjustment, in the case of the issuance of any
Convertible Securities, the maximum number of shares of Common Stock issuable
upon exercise, exchange or conversion of such Convertible Securities shall be
deemed to be outstanding, and the aggregate consideration received by the
Company for the issuance or sale of such Convertible Securities shall be deemed
to include any consideration that would be received by the Company in connection
with the exercise, exchange or conversion of such Convertible Securities,
provided that no further adjustment shall be made upon the actual issuance of
Common Stock upon exercise, exchange or conversion of such Convertible
Securities. However, upon the expiration of any Convertible Securities or any
right or warrant to purchase Common Stock the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this Section 5(d)(ii), if any
such right or warrant shall expire and shall not have been exercised, the
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 Conversion Price
made pursuant to the provisions of this Section 5 after the issuance of such
rights or warrants) had the adjustment of the Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iii) If the Company, at any time while the Series A
Preferred Stock is outstanding, shall distribute to all holders of Common Stock
evidence of its indebtedness or assets or cash (other than ordinary cash
dividends) or rights or warrants to subscribe for or purchase any security of
the Company or any of its subsidiaries (excluding those referred to in Sections
5(d)(i) or 5(d)(ii) above), then concurrently with such distributions to holders
of Common Stock, the Company shall distribute to Holders of the Series A
Preferred Stock, the amount of such indebtedness, assets, cash or rights or
warrants which the Holders of Series A Preferred Stock would have received had
they converted all their Series A Preferred Stock into Common Stock immediately
prior to the record date for such distribution.
(iv) 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.
(v) Whenever the Conversion Price is adjusted
pursuant to this Section 5(d), the Company shall promptly mail to each Holder of
Series A Preferred Stock, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(vi) No adjustment in the Conversion Price shall
reduce the Conversion Price below the then-par value of the Common Stock.
(vii) The Company from time to time may reduce the
Conversion Price by any amount for any period of time if the period is at least
20 Trading Days and if the reduction is irrevocable during the period. Whenever
the Conversion Price is reduced, the Company shall mail to the Holders of Series
A Preferred Stock a notice of the reduction. The Company shall mail the notice,
first-class, postage-prepaid, at least 10 days before the date the reduced
Conversion Price takes effect. The notice shall state the reduced Conversion
Price and the period it will be in effect. A reduction of the Conversion Price
does not change or adjust the Conversion Price otherwise in effect for purposes
of Section 5(d)(i), (ii) or (iii).
(viii) If:
A. In the event of any taking by the Company of a
record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any security or right convertible into or entitling the
holder thereof to receive additional shares of Common Stock, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
B. The Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
C. The approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company (other than a subdivision or combination of the outstanding shares
of Common Stock), 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
D. 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 Series A Preferred Stock,
and shall cause to be mailed to the Holders of Series A Preferred Stock at their
last addresses as they shall appear upon the stock books of the Company, at
least 10 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, share exchange,
dissolution, liquidation or winding-up is expected to become effective, 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 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.
(e) Other Actions. The Company will
not avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed hereunder by the Company and will at all times in good
faith assist in the carrying out of all of the provisions of this Section 5 and
in the taking of all action as may be necessary or appropriate in order to
protect the conversion rights of the Holders of the Series A Preferred Stock
against impairment.
(f) Reservation of Shares. 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 Series A Preferred Stock as herein provided, free from preemptive
rights or any other contingent purchase rights of persons other than the Holders
of Series A Preferred Stock, such number of shares of Common Stock as shall be
issuable (taking into account the adjustments of Section 5(d) hereof) upon the
conversion of all outstanding shares of Series A Preferred Stock. 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.
The Company promptly will take such corporate action as may, in the opinion of
its counsel, which may be an employee of the Company, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including without limitation engaging in
reasonable commercial efforts to obtain the requisite stockholder approval.
(g) Fractional Shares. 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 by applicable law, 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 Series A Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(h) Taxes. The issuance of certificates
for shares of Common Stock on conversion of Series A 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 Series A 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.
(i) Status of Converted Shares.
Shares of Series A Preferred Stock converted into Common Stock shall be canceled
and shall have the status of authorized but unissued shares of Series A
Preferred Stock.
(j) Giving of Notice. Each Conversion
Notice shall be given (i) by facsimile and by mail, postage prepaid, addressed
to the attention of the Chief Financial Officer of the Company at the facsimile
telephone number and address of the principal place of business of the Company,
(ii) by overnight courier or (iii) by hand. Any such notice shall be deemed
given and effective upon the earliest to occur of (1)(a) if such Conversion
Notice is delivered via facsimile prior to 4:30 p.m. (local time in New York
City) on any date, such date or such later date as is specified in the
Conversion Notice, and (b) if such Conversion Notice is delivered via facsimile
after 4:30 p.m. (local time in New York City) on any date, the next date or such
later date as is specified in the Conversion Notice, (2) if such Conversion
Notice is delivered by overnight courier, two business days after delivery to a
nationally recognized overnight courier service or (3) if such Conversion Notice
is delivered by hand, upon actual receipt.
6. Redemption. The Series A Preferred
Stock shall not be redeemable.
7. Covenants. In addition to any other
rights provided by law, so long as any shares of Series A Preferred Stock remain
issued and outstanding, the Company shall not, without first obtaining the
affirmative vote or written consent of the Holders of a majority of the then-
outstanding shares of Series A Preferred Stock, voting as a single class:
(a) authorize or issue shares of any class or series
of stock having any preference or priority as to dividends or redemption rights,
liquidation preferences, conversion rights, or voting rights, superior to or on
a parity with any preference or priority of any series of Series A Preferred
Stock;
(b) reclassify any shares of capital stock of the
Company into shares having any preference or priority as to dividends or
redemption rights, liquidation preferences, conversion rights, or voting rights,
superior to or on a parity with any preference or priority of any series of
Series A Preferred Stock;
(c) authorize or issue any bonds, debentures, notes
or other obligations convertible into or exchangeable for, or having option
rights to purchase, any shares of stock of the Company having any preference or
priority as to dividends or redemption rights, liquidation preferences,
conversion rights, or voting rights, superior to or on a parity with any
preference or priority of Series A Preferred Stock;
(d) declare or pay dividends on or make any
distributions with respect to Common Stock;
(e) increase or decrease the authorized number of
shares of Series A Preferred Stock;
(f) amend or repeal any provision of, or add any
provision to, its certificate of incorporation or bylaws if such action would
alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, any series of Series A Preferred
Stock;
(g) increase the number of shares of Common Stock
reserved for issuance under the Company's stock option plans, other than the
annual increase currently provided in such plans and other than a further
increase of not more than 500,000 shares under the Company's 1997 Stock
Incentive Plan;
(h) engage in any transaction or series of related
transactions constituting a Liquidation Event;
(i) do any act or thing which would result in
taxation of the Holders of shares of the Series A Preferred Stock under
Section 305 of the Tax Code (or any comparable provision of the Tax Code as
hereafter from time to time amended); or
(j) make any material change to the Company's line
of business.
8. Definitions. For the purpose
hereof, the following terms shall have the following meanings:
`Original Issue Date' shall mean the date of the
first issuance of any shares of Series A Preferred Stock regardless of the
number of transfers of any particular shares of Series A Preferred Stock and
regardless of the number of certificates which may be issued to evidence such
Series A Preferred Stock.
`Per Share Market Value' means on any particular
date (a) the closing sales price per share of the Common Stock on such date on
The Nasdaq Stock Market or if the Common Stock is not listed on The Nasdaq Stock
Market, on such other stock exchange on which the Common Stock has been listed
or if there is no such price on such date, then the closing sales price on such
exchange on the date nearest preceding such date, or (b) if the Common Stock is
not listed on The Nasdaq Stock Market or any stock exchange, the closing sales
price for a share of Common Stock in the over-the-counter market, as reported by
the NASD at the close of business on such date, or (c) if the Common Stock is
not quoted on the NASD, the closing sales price for a share of Common Stock in
the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), or (d) if the Common Stock is no longer publicly traded the
fair market value of a share of Common Stock as 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 of the
shares of the Series A 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.
`Investment Agreement' means the Investment
Agreement, dated as of the date hereof, between the Company and the original
Holder of the Series A Preferred Stock and certain other parties.
`Trading Day' means (a) a day on which the
Common Stock is traded on The Nasdaq Stock Market or principal stock exchange on
which the Common Stock is then listed, or (b) if the Common Stock is not listed
on The Nasdaq Stock Market or any stock exchange, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the NASD, or (c)
if the Common Stock is not quoted on The Nasdaq Stock Market, 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).
IN WITNESS WHEREOF, Southwall Technologies Inc. has caused this certificate
to be signed by Thomas G. Hood, its Chief Executive Officer, this 18th day of December 2003.
SOUTHWALL TECHNOLOGIES INC.
By: /s/ Thomas G. Hood
Thomas G. Hood
Chief Executive Officer
EX-99
6
exh99-5.htm
EXHIBIT
99.5
NEITHER THIS WARRANT NOR ANY SHARES ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAW, AND NEITHER
THIS WARRANT NOR ANY SHARES ISSUABLE UPON CONVERSION HEREOF MAY BE TRANSFERRED
IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN OPINION OF COUNSEL (WHICH MAY BE
COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS.
Warrant
To Purchase Common Stock of
Southwall Technologies Inc.
- Issuance. This Warrant, dated as of December
18, 2003, is issued to Needham & Company, Inc. by Southwall Technologies
Inc., a Delaware corporation (hereinafter with its successors called the
`Company'). This Warrant is issued pursuant to Section 2.2 of that
certain Investment Agreement dated as of December 18, 2003, by and among Needham
& Company, Inc. (`Needham'), Needham Capital Partners III, L.P.,
Needham Capital Partners IIIA, L.P., Needham Capital Partners III (Bermuda),
L.P., Dolphin Direct Equity Partners, LP and the Company (the `Investment
Agreement').
Purchase Price; Number of Shares. Subject to the
terms and conditions hereinafter set forth, the registered holder of this
Warrant (the `Holder'), is entitled upon surrender of this Warrant with
the subscription form annexed hereto duly executed, at the office of the
Company, 3975 East Bayshore Road, Palo Alto, California 94304, or such other
office in the United States as the Company shall notify the Holder of in writing
on or before the Termination Date (as defined below), to purchase from the
Company 941,115 shares (as adjusted or increased, the `Warrant Shares')
of the Company's Common Stock, $.001 par value per share (`Common
Stock'), at an exercise price equal to $0.01 per share. The `Termination
Date' shall mean December 18, 2008.
Payment of Purchase Price. The aggregate purchase
price payable upon any exercise of this Warrant may be paid in cash or by check
or as set forth in Section 4 below.
Net Issuance Election. The Holder may elect to
receive, without the payment by the Holder of any additional consideration,
Warrant Shares equal to the value of this Warrant or any portion hereof by the
surrender of this Warrant or such portion to the Company, with the net issuance
election notice annexed hereto duly executed, at the office of the Company.
Thereupon, the Company shall issue to the Holder such number of fully paid and
nonassessable Warrant Shares as is computed using the following
formula:
X = Y (A-B)
A
where |
X = |
the number of Warrant Shares to be issued to the Holder
pursuant to this Section 4. |
|
Y = |
the number of Warrant Shares covered by this Warrant in
respect of which the net issuance election is made pursuant to this Section
4. |
|
A = |
Fair Market Value (as defined below) of one Warrant Share at
the time the net issuance election is made pursuant to this Section 4. |
|
B = |
the purchase price per share in effect under this Warrant at
the time the net issuance election is made pursuant to this Section 4. |
For purposes of this Section 4, `Fair Market Value' on
any day shall mean (a) the average of the closing bid and asked prices of
a share of Common Stock on the trading day immediately preceding the day in
question in the over-the-counter market as shown by the National Association of
Securities Dealers, Inc. Automated Quotation System, or any similar system of
automated dissemination of quotations and securities prices then in common use,
if so quoted, as reported by any member firm of the New York Stock Exchange
selected by the Company and the Holder, (b) if not quoted as describe in
clause (a), the average closing bid and asked prices for a share Common Stock on
the trading day immediately preceding the day in question as reported by the
National Quotation Bureau Incorporated or any similar successor organization, as
reported by any member firm of the New York Stock Exchange selected by the
Company and the Holder, or (c) if not quoted as described in clause (a)
or (b) above, the fair market value of a share of Common Stock on such date as
determined by the board of directors of the Company and the Holder in good
faith.
- Partial Exercise. This Warrant may be exercised in
part, and the Holder shall be entitled to receive a new warrant, which shall be
dated as of the date of this Warrant, covering the number of Warrant Shares in
respect of which this Warrant shall not have been exercised.
- Issuance Date. The person or persons in whose name
or names any certificate representing Warrant Shares is issued hereunder shall
be deemed to have become the holders of record of such shares represented
thereby as at the close of business on the date this Warrant is exercised with
respect to such shares, whether or not the transfer books of the Company shall
be closed.
- Expiration Date. This Warrant shall expire at the
close of business on the Termination Date, and shall be void
thereafter.
- Reserved Shares; Valid Issuance. The Company
covenants that it will reserve and keep available at all times from and after
the date hereof such number of its authorized shares of Common Stock, free from
all preemptive or similar rights therein, as will be sufficient to permit the
exercise of this Warrant in full. The Company further covenants that such shares
as may be issued pursuant to the exercise of this Warrant will, upon issuance,
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
- Subdivisions, Split-ups, Combinations and Stock
Dividends; Reclassifications.
- If after the date hereof the Company shall subdivide the
Common Stock, by split up or otherwise, or combine such shares, or issue
additional shares in payment of a stock dividend on such shares, the number of
shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination, and the purchase price
shall forthwith be proportionately decreased in the case of a subdivision or
stock dividend, or proportionately increased in the case of a
combination.
- If after the date hereof there shall be any
reclassification, capital reorganization or change of the Common Stock (other
than as a result of a subdivision, combination or stock dividend provided for in
Section 9(a) hereof), then, as a condition of such reclassification,
reorganization or change, lawful provisions shall be made, and duly executed
documents evidencing the same from the Company shall be delivered to the Holder,
so that the Holder shall thereafter have the right to purchase, at a total price
not to exceed that payable upon the exercise of this Warrant in full, the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, reorganization or change, by holders of the number of
shares of Common Stock which might have been purchased by the Holder immediately
prior to such reclassification, reorganization or change, and in such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including, without limitation,
provisions for the adjustment of the purchase price and the number of shares
issuable hereunder) shall thereafter be applicable in relation to any shares of
stock or other securities and property thereafter deliverable upon exercise
hereof.
- Merger or Sale. If this Warrant has not been
exercised prior to the closing of a `Merger or Sale', this Warrant will
terminate automatically upon such closing. `Merger or Sale' shall mean one or a
series of related transactions involving a sale of all or substantially all of
the Company's assets, a merger of the Company with or into another entity (if
after such merger or asset sale the holders of a majority of the Company's
voting securities before the transaction do not constitute a majority of the
voting securities of the successor entity), or a transfer of all or
substantially all of the Company's voting equity securities to another person or
entity.
- Fractional Shares. In no event shall any
fractional share of Common Stock be issued upon any exercise of this Warrant.
If, upon exercise of this Warrant as an entirety, the Holder would, except as
provided in this Section 11, be entitled to receive such a fractional share,
then the Company shall issue the next higher number of full shares of Common
Stock, issuing a full share with respect to such fractional share.
- Registration Rights. Reference is hereby made to
the Registration Rights Agreement dated December 18, 2003 by and among the
Company, Needham and certain other investors named therein for certain
provisions relating to the rights of the Holder of this Warrant and the Warrant
Shares to require the Company to register the Warrant Shares under the
Securities Act of 1933, as amended.
- Certificate of Adjustment. Whenever the purchase
price is adjusted, as herein provided, the Company shall promptly deliver to the
Holder a certificate of the Company's Chief Financial Officer setting forth the
purchase price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
- Notices of Record Date, Etc. In the event
of:
- any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right,
- any reclassification of the capital stock of the Company,
capital reorganization of the Company, Merger or Sale, or
- any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to
be mailed to the Holder a notice specifying (x) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (y) the date on which any such reclassification,
reorganization, Merger or Sale or conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record in respect of such event are to be determined. Such notice
shall be mailed at least 20 days prior to the date specified in such notice on
which any such action is to be taken.
- Amendment. The terms of this Warrant may be
amended, modified or waived only with the written consent of the Company and the
Holder.
- Warrant Register; Transfers, Etc.
- The Company will maintain a register containing the names
and addresses of the registered holders of the Warrants. The Holder may change
his or its address as shown on the warrant register by written notice to the
Company requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be given by certified mail or delivered
to the Holder at his or its address as shown on the warrant register.
- Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the Warrant Shares purchasable hereunder. Upon surrender of this
Warrant to the Company, together with the assignment hereof properly endorsed
for transfer of this Warrant as an entirety by the Holder, the Company shall
issue a new warrant of the same denomination to the assignee. Upon surrender of
this Warrant to the Company, together with the assignment hereof properly
endorsed by the Holder for transfer with respect to a portion of the Warrant
Shares purchasable hereunder, the Company shall issue a new warrant to the
assignee, in such denomination as shall be requested by the Holder hereof, and
shall issue to such Holder a new warrant covering the number of shares in
respect of which this Warrant shall not have been transferred.
- In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon
surrender and cancellation of any mutilated Warrant, or (ii) in lieu of
any Warrant lost, stolen or destroyed, upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft or destruction of such Warrant
(including a reasonably detailed affidavit with respect to the circumstances of
any loss, theft or destruction) and of indemnity reasonably satisfactory to the
Company.
- No Impairment. The Company will not, by amendment
of its charter or by-laws or through any reclassification, capital
reorganization, consolidation, merger, sale or conveyance of assets,
dissolution, liquidation, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder.
- Governing Law. The provisions and terms of this
Warrant shall be governed by and construed in accordance with the internal laws
of The State of New York.
- Successors and Assigns. This Warrant shall be
binding upon the Company's successors and assigns and shall inure to the benefit
of each of the Holder's successors, legal representatives and permitted
assigns.
[Signature page follows.]
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed as an instrument under seal by its duly authorized officer as of the
date first above written.
|
Southwall Technologies, Inc. |
|
By:
Name:
Title: |
Agreed to and accepted by: |
|
Needham & Company, Inc. |
|
By:
Name:
Title: |
|
Subscription
Date: _______________
The undersigned hereby subscribes for:
__________ shares of Common Stock covered by this
Warrant.
The certificate(s) for such shares shall be issued in the
name of the undersigned or as otherwise indicated below:
Signature
Name for Registration
Mailing Address
Net Issuance
Election Notice
Date: _______________
The undersigned hereby elects under Section 4 to surrender
the right to purchase:
__________ shares of Common Stock covered by this
Warrant.
The certificate(s) for such shares issuable upon such net
issuance election shall be issued in the name of the undersigned or as otherwise
indicated below:
Signature
Name for Registration
Mailing Address
Assignment
For value received _______________hereby sells,
assigns and transfers unto __________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name and address of Assignee
above)
the within Warrant, and does hereby irrevocably
constitute and appoint ________________ its attorney to transfer the within
Warrant on the books of the within named Company with full power of substitution
in the premises.
Dated: _______________
In the Presence of:
EX-99
7
exh99-7.htm
EXHIBIT 99.7
FORBEARANCE AGREEMENT
BY AND AMONG
SOUTHWALL TECHNOLOGIES INC.
AND
PACIFIC BUSINESS FUNDING,
A DIVISION OF CUPERTINO NATionaL BANK
FORBEARANCE AGREEMENT
This Forbearance Agreement (`Forbearance Agreement') is
entered into on this 18th day of December 2003, at Cupertino, California, by and
among the following parties: PACIFIC BUSINESS FUNDING, a division of CUPERTINO
NATIONAL BANK, (`PBF'); SOUTHWALL TECHNOLOGIES INC., a Delaware corporation
(`STI').
RECITALS
- STI was and is a Delaware corporation
- PBF's business includes extensions of credit in the form
of factoring of accounts receivable. On or about May 16, 2003, PBF agreed to
factor accounts of STI pursuant to certain written agreements between the
parties. From time to time thereafter, PBF advanced moneys to STI in various
amounts and under certain terms and conditions. Said advances were made pursuant
to the certain instruments, documents and agreements (hereinafter `Factoring
Documents') executed and delivered to PBF by STI, including the
following:
- That certain DOMESTIC FACTORING AGREEMENT dated May 16,
2003, together with all exhibits and schedules thereto, including without
limitation that certain written SCHEDULE 1 TO DOMESTIC FACTORING AGREEMENT,
together with that certain written Amendment to the Domestic Factoring dated
June 16, 2003, and that certain written AMENDMENT TO DOMESTIC FACTORING
AGREEMENT executed in October 2003 (collectively the `Domestic Factoring
Agreement').
- That certain EXPORT-IMPORT BANK FACTORING AGREEMENT dated
May 16, 2003, together with all exhibits and schedules thereto including without
limitation that certain written SCHEDULE 1 TO EXPORT-IMPORT BANK FACTORING
AGREEMENT, together with that certain written Amendment to the Export-Import
Factoring Agreement dated June 16, 2003 (collectively the `Ex-Im Factoring
Agreement').
- That certain written Intellectual Property Security
Agreement dated May 16, 2003 (the `IP Security Agreement').
- That certain UCC Financing Statement, which Financing
Statement was filed on or about July 30, 2001 in the records of the State of
Delaware as Instrument No. 1082062-6
- That certain written Export Import Bank of the United
States Working Capital Guarantee Program Borrower Agreement; and
- Other Related Documents.
- As of December 11, 2003, the principal outstanding in
respect to the obligations of STI to PBF under the Domestic Factoring Agreement
was $1,478,052.92 plus attorneys fees incurred by PBF in
connection with STI's default under the Factoring Documents. As of
the date of December 11, 2003, the amount outstanding in respect to the
obligations of STI to PBF under the Ex-Im Factoring Agreement was
$2,678,071.98, plus attorneys fees incurred by PBF in connection
with STI's default under the Factoring Documents.
- The obligations of STI under each of the Domestic
Factoring Agreement and the Ex-Im Factoring Agreement are secured by tangible
and intangible assets of STI as more particularly described in the Domestic
Factoring Agreement, the Ex-Im Factoring Agreement, and the IP Security
Agreement. The tangible and intangible assets of STI described in said documents
shall hereinafter be referred to as the `Collateral.'
- Commencing on or about November 17, 2003,
and continuing thereafter, STI defaulted under each of the Domestic
Factoring Agreement and the Ex-Im Factoring Agreement by breaching the Tangible
Net Worth covenants in each of said agreements. Said defaults shall hereinafter
be referred to as the `Defaults.'
- By reason of the Defaults, PBF is entitled to exercise
its rights and remedies under the Factoring Documents, including demanding
immediate repurchase of Purchased Accounts or seeking to foreclose its security
interest in the Collateral.
- Prior to the execution of this Forbearance Agreement,
Needham & Company, Inc. (`Needham') and STI have entered into that certain
letter agreement (the `Needham Letter Agreement') dated November 11, 2003.
Pursuant to the Needham Letter Agreement, Needham and Southwall, among other
parties, have also entered into that certain written Investment Agreement dated
December 18, 2003 (hereinafter the `Investment Agreement').
- Concurrently with the execution of this Forbearance
Agreement, STI is entering into a new credit facility with PBF for an extension
of credit by a loan in the maximum principal amount of $3,000,000 (the `New
Loan'), which shall be guaranteed by Needham, Inc. (`Needham') with the
guarantee (the `Needham Guaranty') to be secured or supported by a letter of
credit (the `Needham Letter of Credit') acceptable to PBF. The terms and
conditions of the New Loan shall be set forth in documents (the `New Loan
Documents') acceptable to PBF in its sole discretion and executed by the
parties. The New Loan Documents will include a grant to PBF of a security
interest in assets of Southwall but such security interest shall be subordinate
to the security interests described in Recital D above.
- STI has requested that PBF forbear from pursuing various
remedies to which PBF is legally entitled as a result of the Defaults,
including, but not limited to:
- Requiring immediate re-purchase of all Purchased Accounts
under the Factoring Documents;
- Declining to purchase any additional accounts under the
Factoring Documents; and
- Exercising PBF's rights and remedies with respect to the
Collateral.
- Without waiving the Defaults or any other defaults under
the Factoring Documents, PBF has agreed to continue to forbear from exercising
the rights and remedies described above, but only upon the terms and conditions
expressly set forth herein.
NOW THEREFORE, IN CONSIDERATION of the foregoing Recitals and
the terms and conditions and agreements contained herein, the parties hereby
agree as follows:
AGREEMENT
- Definitions.
Capitalized terms not otherwise defined in this Forbearance Agreement shall have
the meanings set forth in the Factoring Documents.
- Acknowledgment. STI
acknowledges the truth and accuracy of each of the facts and legal relations
contained in the Recitals to this Forbearance Agreement, including, but not
limited to the following:
- By reason of the Defaults, all sums outstanding,
including sums due for immediate repurchase of Purchased Accounts, under the
Factoring Documents are immediately due and owing in full.
- The Defaults are and continue to be material and
serious;
- As a result of the Defaults, PBF has the right to
exercise its rights and remedies under the Factoring Documents and the law,
including, but not limited to, rights and remedies with respect to foreclosure
of security interests in the Collateral.
- Payments/Warrants. STI
shall pay the following sums in good funds and issue the following warrants to
PBF:
- All payments due or that may come due under the terms of
the Domestic Factoring Agreement and the Ex-Im Factoring Agreement; and
- As a forbearance fee upon execution of this Forbearance
Agreement, the sum of $80,000 ($20,000 of which has already been paid), plus
PBF's attorneys fees and any other costs incurred as of the date hereof in
connection with this Forbearance Agreement or the Defaults, and delivery of a
warrant in a form acceptable to PBF for a term of five years for 250,000 shares
of STI's common stock with an exercise price of $0.01 per share, such warrant to
be in a form acceptable to PBF but substantially similar to the first warrant to
be issued to Needham pursuant to the Investment Agreement.
- Applications of
Funds. PBF may apply the funds received by it pursuant to section 3.2 above
to other income or to principal, fees or other obligations owed as it deems
appropriate, and in its sole discretion.
- Forbearance. PBF shall
forbear from exercising its rights or remedies with respect to foreclosure of
the security interests in the Collateral, imposition of the Default Interest
rate or other enforcement of the Term Note and other Factoring Documents on the
terms and conditions set forth herein including the following:
- The Maximum Commitment set forth in Schedule 1 of the
Domestic Factoring Agreement is hereby amended to mean an amount equal to the
lesser of (a) Three Million Dollars or (b) the Advance Rate; and the Maximum
Commitment set forth in Schedule 1 of the Ex-Im Factoring Agreement is hereby
amended to mean an amount equal to the lesser of (a) Four Million Dollars or (b)
the Advance Rate.
- There shall be no default under the New Loan Documents or
the Factoring Documents apart from the Defaults;
- There shall be no default, as defined in Section 11
below, under this Forbearance Agreement;
- STI shall, on or before January 31, 2004, have closed and
received all funds to be paid to STI pursuant to the `Initial Equity' investment
described in Article II of the Investment Agreement,
- STI shall, on or before May 5, 2004, have closed and
received all funds to be paid to STI pursuant to the `Second Equity' investment
described in Article II of the Investment Agreement;
- The terms of this Forbearance Agreement and the New Loan
Documents control over any provisions in the Needham Letter Agreement or the
Investment Agreement, and performance under the Needham Letter Agreement and
Investment Agreement shall be done in a manner consistent with this Forbearance
Agreement and the New Loan Documents;
- No other holder of a voluntary or involuntary lien
against all or part of the Collateral shall initiate any action to foreclose or
otherwise enforce such lien; and
- If not terminated earlier pursuant to section 11 below,
this forbearance shall terminate on May 5, 2004, at which time the Domestic
Factoring Agreement and the Ex-Im Factoring Agreement shall also be deemed to
have terminated pursuant to section 10 of each of said agreements.
- Acknowledgment of Certain
Material Facts. STI further acknowledges that the sums claimed by PBF in
Recital C to be due and owing under the Factoring Documents are currently due
and owing, that no defense to payment thereof exists, that the Factoring
Documents are binding and enforceable according to their terms, and that PBF has
no obligation to STI to advance further funds to STI or to purchase accounts
under the Factoring Documents but continues to have the right to
purchase Accounts in its sole discretion in accordance with the terms of the
Factoring Documents. Agreement, all the terms and conditions of the Factoring
Documents remain in full force and effect, including without limitation the
grants of security interests therein.
- Audits; Inspections.
Throughout the term of this Forbearance Agreement, PBF at the expense of STI may
conduct audits and/or inspections of the Collateral, including STI's books,
records, accounts receivable and inventory. Upon at least one business day's
written notice by PBF to STI, STI shall permit representatives, agents and/or
employees of PBF during normal business hours to visit, examine, audit, inspect,
make copies of, have reasonable access to, and consult with, as the case may be,
(i) the Collateral, (ii) STI's books and records relating to the Collateral,
including the accounts receivable and/or the inventory of STI, (iii) employees
or agents of STI who are familiar with STI's books and records or the
information set forth therein, and (iv) such other information as PBF may
reasonably request. If STI now or at any time hereafter maintains any books,
accounts and/or records (including without limitation computer generated records
and computer software programs for the generation of such records) in the
possession of a third party, STI, upon PBF's request, shall notify such party to
permit PBF free access to such books, accounts and records at all reasonable
times and to provide PBF with copies of any records it may request, all at STI's
expense. Said audits and inspections may be conducted as frequently as PBF
determines in its sole discretion. PBF's right to conduct said audits and
inspections does not excuse STI from complying with any reporting requirements
contained in the Factoring Documents or this Forbearance Agreement.
- Warranty and Release. STI
hereby agrees as follows:
- STI warrants and represents that to the extent STI makes
any payments hereunder, at the time of each such payment, STI is fully
authorized to make such payment.
- STI warrants and represents to PBF that to the best of
its knowledge or information, it has and has had no claims, causes of action,
demands, costs, losses or actions of any nature against PBF, whether the same
have been or might have been asserted as a claim, cross-claim, counter-claim or
cause of action in any tribunal.
- For and in consideration of PBF's agreement set forth
herein, STI hereby releases and forever discharges PBF, its affiliates, and
their respective officers, directors, employees, shareholders, attorneys, agents
and representatives, individually and collectively, from any and all matters
arising out of the business relationships which have existed to the date hereof
between PBF and STI, including any and all past, present or future claims,
actions, causes of action, obligations, costs or demands, known or unknown,
whether or not any such claim, action, cause of action, obligation, cost, lost
or demand has been, or might have been, asserted as a claim, cross-claim,
counter-claim or cause of action in any tribunal.
- STI warrants and represents that it has not assigned or
transferred or purported to assign or transfer to any other person or entity any
claim or matter released herein and that no other person has any interest
therein of any nature. In the event that STI shall have assigned or transferred,
or purported to assign or transfer, or any other person shall claim an interest
in any claim or other matter herein release, then the releasing party or parties
shall indemnify PBF and hold it harmless from and against any and all losses,
costs, claims or expenses, including but not limited to all costs related to the
defense of any action, including reasonable attorneys' fees, based upon or
arising out of or incurred as a result of any such claim, assignment or
transfer.
- STI understands and acknowledges that if any claims or
other matters herein released existed, such would be disputed by PBF. No action
taken by the parties to this Forbearance Agreement, or any of them, either
previously or in connection with this Forbearance Agreement shall be deemed or
construed to be (a) an admission to the truth or falsity of any claims made; or
(b) an acknowledgment or admission by PBF of any fault or liability whatsoever
to any other party or to any third party.
- STI hereby relinquishes and waives all rights conferred
upon it by the provisions of Section 1542 of the California Civil Code (or any
like provision of federal or state law), which reads as follows:
A General Release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his settlement
with the debtor.
STI hereby acknowledges that it is aware that it or its
attorneys might hereafter discover facts different from or in addition to those
which it or its attorneys now know or believe to be true with respect to any of
the matters herein released, including that no such claims presently exist, and
STI agrees that this instrument shall remain in effect as a full and complete
release notwithstanding any such different or additional facts. STI hereby
covenants that this Forbearance Agreement shall inure to the benefit of and be
binding upon its representatives, successors, trustees and assigns.
- Notice of Material Events.
STI hereby covenants and agrees that until the earlier of (i) payment in full of
PBF of all obligations under this Forbearance Agreement, the Factoring Documents
or (ii) completion by PBF of foreclosure of the security interest in the
Collateral, it will, from and after the date of execution of this Forbearance
Agreement, promptly give written notice to PBF of:
- Any substantial dispute which may exist between STI and
any governmental or regulatory body or law enforcement authority.
- Each default hereunder and any event, which upon a lapse
of time or notice or both, would reasonably be expected to become a
default.
- Any other matter which has resulted or might result in a
material adverse change in the financial condition or operations of
STI.
- Any event which materially adversely affects the value of
the Collateral, the ability of STI or PBF to dispose of the Collateral, or the
rights and remedies of PBF in relation to the Collateral, including but not
limited to the levy or exercise of any legal process or remedy against the
Collateral or the adoption of any order, arrangement, or procedure affecting the
Collateral, whether governmental or otherwise.
- Relationship of PBF and Other
Parties to this Forbearance Agreement. Nothing contained in this Forbearance
Agreement or in any other agreement among the parties is intended, nor shall be
construed, to establish PBF as a joint venturer or partner of STI, and STI
agrees to indemnify and hold PBF harmless from any and all damages resulting
from any such construction of this Forbearance Agreement or any other
agreement.
- Default. The occurrence of
any of the following (each a `default') shall, without notice to STI and at the
option of PBF, immediately terminate its forbearance under section 5 of this
Forbearance Agreement and result in PBF no longer having any obligation to
forbear from the exercise of any of its rights or remedies under the Factoring
Documents, applicable law or otherwise, including, but not limited to, any
obligation to forbear from (i) requiring immediate repurchase of all Purchased
Accounts, or (ii) exercising any of PBF's rights or remedies against the
Collateral, including foreclosing judicially or non-judicially to the extent
permitted under the Factoring Documents or applicable law:
- The failure of STI to pay on or before the due date any
payment required pursuant to this Forbearance Agreement in accordance with the
terms hereof.
- Any representation or warranty to PBF herein or in any
other agreement, document, instrument or certificate executed or delivered
pursuant hereto or in connection with any transaction contemplated herein, which
proves false or misleading in any material respect when made.
- Failure of any of STI to comply fully and timely with any
of the provisions of this Forbearance Agreement.
- Breach of any of the terms and conditions of the
Factoring Documents as modified herein, with the exception of the
Defaults.
- The occurrence of an Event of Default under either the
Loan Agreement or the Guaranty as part of the New Loan Documents.
- Expiration or termination of the Needham Letter of
Credit.
- An Event of Default under the Investment
Agreement.
- If either of STI or Needham before all obligations under
the Factoring Documents and this Forbearance Agreement are paid in full make an
assignment for the benefit of creditors, file a petition in bankruptcy, petition
or apply to any tribunal for the appointment of a custodian, receiver or trustee
for either of them, or a substantial part of the assets of either of them, or
commence any proceeding under any bankruptcy or reorganization, arrangement,
readjustment of debt, dissolution or liquidation, under the laws of any
jurisdiction, now or hereafter in effect, or shall have such a petition or
application or proceeding commenced against any of them which remains
undismissed for a period of 60 days or more, or if any of them shall have made
or suffered a transfer of any of their assets which transfer may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law, or if any of them
shall have made a transfer of their respective assets to or for the benefit of a
creditor.
- No Waiver of Default. By
entering into this Forbearance Agreement, PBF waives none of the Defaults or any
other default under the Factoring Documents nor its right to collect all
obligations currently owing under either the Factoring Documents.
- Notice. Any notice given
pursuant to this Forbearance Agreement shall be in writing, shall be effective
upon transmission and may be given by deposit in the United States Mail, by
personal delivery, by facsimile transmission or by email transmission addressed
to the parties hereto as follows:
To STI:
Southwall Technologies Inc.
Attn: Chief Financial Officer
3975 East Bayshore Rd.
Palo Alto, CA 94303
Fax: (65) 967-8713
Email: mseifert@southwall.com
To PBF:
Pacific Business Funding
Attn: Mike Hansen
20195 Stevens Creek Blvd., Suite 220
Cupertino, CA 95014
Fax: (408) 255-9313
Email: mhansen@gbbk.com
or to such other street address, facsimile number or email
address of a party hereto as such party may designate by written notice to the
other parties. Each party shall be responsible for keeping the other parties
hereto apprised of any changes in the above-referenced addresses and/or fax
numbers. If a party does not receive notice that an address or fax number has
changed, said party may rely on the above-referenced addresses and fax numbers,
and any notices sent to said addresses or fax numbers shall be deemed effective
and received.
- Governing Law. This
Forbearance Agreement shall be interpreted and governed by California law
without giving effect to principles of conflicts of law, and the parties agree
that the venue for any lawsuit relating to this Forbearance Agreement or
Factoring Documents shall be the State or Federal courts situated in the County
of Santa Clara, California. THE PARTIES ACKNOWLEDGE AND AGREE THAT IN ANY SUCH
LAWSUIT, THEY EACH WAIVE THE RIGHT TO TRIAL BY JURY AND THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO THE OTHER PARTY TO ENTER INTO THIS FORBEARANCE
AGREEMENT.
- Successors. The parties
hereto expressly agree and covenant that this Forbearance Agreement shall inure
to the benefit of and be binding upon their respective representatives,
successors, trustees and assigns. With the exception of the foregoing, this
Forbearance Agreement is not for the benefit of any other parties apart from PBF
and STI.
- Effectuation of Forbearance
Agreement. The parties hereto agree to do all things and to execute all
documents reasonably necessary to effectuate the provisions of this Forbearance
Agreement, including execution and delivery of any documents necessary or
appropriate to ensure the existence, priority, validity or perfection of any
security interest of PBF. Furthermore, STI agrees to execute whatever documents
are necessary and to cooperate with PBF in providing notice to account debtors
for Purchased Accounts that such accounts have been purchased by PBF and that
PBF is entitled to payment of the proceeds thereof.
- Entire Agreement. This
Forbearance Agreement contains the entire agreement between the parties
pertaining to the subject matter herein, and supersedes any and all prior and/or
contemporaneous oral or written negotiations, agreements, representations, and
understandings, with the exception of the Factoring Documents. The parties, and
each of them, understand that this Forbearance Agreement is made without
reliance upon any inducement, statement, promise, or representation other than
those contained within this Forbearance Agreement.
- Validity of Forbearance
Agreement. If any of the provisions of this Forbearance Agreement or the
application thereof to any person, place or circumstance shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Forbearance Agreement and such provisions as apply to other
persons, places and circumstances shall remain in full force and
effect.
- Voluntary Execution. This
Forbearance Agreement is executed voluntarily and without any duress or undue
influence on the part of or on behalf of any of the parties hereto.
- Acknowledgments with Respect to
this Forbearance Agreement. The parties acknowledge that:
- They have read this Forbearance Agreement and have not
relied upon any statement or representation of any kind of any other party,
except as set forth in this Forbearance Agreement;
- They have been represented in the preparation,
negotiation and execution of this Forbearance Agreement by legal counsel of
their own choice and have received full and complete advice from such counsel or
have knowingly, intentionally and voluntarily waived their right to such
representation and advice;
- They understand the consequences and terms of this
Forbearance Agreement and of the releases and waivers it contains; and
- They are fully aware of the legal and binding effect of
this Forbearance Agreement.
- Time of the Essence. Time
is of the essence of this Forbearance Agreement.
- Execution in Counterparts.
This Forbearance Agreement may be executed in an original or one or more
counterparts, each of which shall constitute a duplicate original.
- Headings. The headings and
numbers used in this Forbearance Agreement are included for purpose and
convenience of reference only. They shall not be used to explain, limit, or
extend the meaning of any part of this Forbearance Agreement.
- Waiver Only in Writing. No
party to this Forbearance Agreement may be deemed in the future to have waived
or relinquished any power, right, or remedy hereunder except by a writing signed
by the party giving the waiver and delivered to the other parties and
acknowledged in writing by the party or parties hereto benefiting from the
waiver. No failure of any party to exercise any power, right, or remedy given to
it hereunder, or to insist on compliance by any other party with any obligation,
condition, or covenant hereunder, and no custom or practice of any party at
variance with the terms hereof, shall constitute a waiver of any party's right
to demand exact compliance with the terms hereof. Waiver of any particular
default shall not affect or impair the waiving party's rights with respect to
subsequent defaults of the same or of a different nature; nor shall any delay or
omission of any party to exercise any of its rights arising from a default of
another party affect or impair such party's rights as to said default or to any
subsequent default.
- No Contest and Construction of
Forbearance Agreement. Each of the parties to this Forbearance Agreement
agrees that it will not seek to have any portion or provision of this
Forbearance Agreement, or the Forbearance Agreement as a whole, rendered or
declared unenforceable. Further, each of the parties hereto acknowledges and
agrees that this Forbearance Agreement has been negotiated and drafted by all
parties hereto and that it is not to be construed or interpreted more strongly
against any party hereto than any other party hereto.
- Amendments. This
Forbearance Agreement shall not be modified, amended or altered without the
written consent of all parties.
- Reporting Requirements.
During the term of this Forbearance Agreement, STI has the following reporting
requirements at the address in section 14 above:
- Upon reasonable request of PBF, STI shall deliver to PBF
written cash flow projections in a form satisfactory to PBF; and
- Within five business days of completion, a copy of the
minutes of each of STI's board of director meetings.
Each of the foregoing shall be delivered to PBF's address set
forth in section 14 above accompanied by a certification in a form acceptable to
PBF by an officer of STI that the information provided is true, complete and
correct to STI's knowledge.
- Termination Of Forbearance.
Unless earlier terminated in accordance with the terms of this Forbearance
Agreement, PBF's forbearance shall terminate on May 4, 2004, at which time all
sums owing under the Factoring Documents and this Forbearance Agreement shall be
paid in full.
IN WITNESS WHEREOF, this Forbearance Agreement has been
executed as of the date first above written.
PACIFIC BUSINESS FUNDING,
a division of CUPERTINO NATIONAL BANK
By:
Its:
SOUTHWALL TECHNOLOGIES INC.,
a Delaware corporation
By:
Its:
1. Definitions 3
2. Acknowledgment 3
3. Payments/Warrants 3
4. Applications of Funds 3
5. Forbearance 3
6. Acknowledgment of Certain Material Facts 4
7. Audits; Inspections 4
8. Warranty and Release 5
9. Notice of Material Events 6
10. Relationship of PBF and Other Parties to this Forbearance
Agreement 6
11. Default 6
12. No Waiver of Default 7
13. Notice 7
14. Governing Law 8
15. Successors 8
16. Effectuation of Forbearance Agreement 8
17. Entire Agreement 8
18. Validity of Forbearance Agreement 9
19. Voluntary Execution 9
20. Acknowledgments with Respect to this Forbearance Agreement 9
21. Time of the Essence 9
22. Execution in Counterparts 9
23. Headings 9
24. Waiver Only in Writing 9
25. No Contest and Construction of Forbearance Agreement 10
26. Amendments 10
27. Reporting Requirements 10
28. Termination Of Forbearance 10
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`
end
EX-99
9
exh99-1.htm
Exhibit 99.1
![](logo.gif)
PRESS RELEASE
3975 East Bayshore Road
Palo Alto, CA 94303
Phone: (650) 962-9111
Fax: (650) 967-8713
www.southwall.com
Contacts:
Thomas G. Hood, President and CEO
thood@southwall.com
Michael E. Seifert, Sr. Vice President and CFO
mseifert@southwall.com
For Immediate Release
Southwall Technologies Secures New Bank Loan and Equity
Financing Agreement Led By Needham & Company
PALO
ALTO, CA - December 19, 2003 - Southwall Technologies Inc. (Nasdaq:SWTX), a
global developer, manufacturer and marketer of thin-film coatings for the electronic display, automotive
glass and architectural markets, today announced that on December 18, 2003, it
secured an agreement for a new bank loan guarantee and equity financing package
of up to $7.5 million from Needham & Company, Inc., its affiliates and
Dolphin Asset Management.
`As noted in our news release on third-quarter 2003 results, we recognize the
urgent need to reduce our spending and raise additional cash,' said Thomas G.
Hood, Southwall's president and chief executive officer. `We believe that this
agreement, led by Needham, in conjunction with significant internal changes
already in progress, will enable Southwall to achieve quarterly cash break-even
in 2004 and begin generating positive cash flow from operations as soon as
possible after that. We expect that the Needham led financing will give us the
additional time we need to achieve production qualification for the exciting
design-ins we have been actively working in the electronic display market.'
If all of the transactions contemplated by the agreement between Southwall
and the Needham led group are completed, Southwall will receive up to $3,000,000
in new borrowings from Pacific Business Funding (which are to be guaranteed by
Needham) and up to $4,500,000 in cash in exchange for 4,500,000 shares of a
newly issued convertible preferred stock. As part of the guarantee and equity
purchases, if any, the investors will also receive warrants to purchase common
stock. If Needham and its affiliated entities were to exercise all such
warrants and convert all such shares of preferred stock, while maintaining its
current position of approximately 1,481,000 shares of common stock, then the
firm and its affiliated entities would own approximately 6,865,000 shares of
Southwall common stock, or about 31% of the total shares outstanding. Dolphin
currently does not own any shares of common stock but upon exercise of its
warrants would own approximately 2,692,000 shares of Southwall common stock, or
about 12% of the total shares outstanding.
Under the terms of the agreement, Needham will issue the guarantees of
Southwall's bank line of credit facility in two separate pieces of $2.25 million
and $750,000, respectively, and Needham and Dolphin will purchase the equity in
two separate tranches of $1.5 million and $3.0 million, respectively, following
the extensions of credit under the new facility. The new borrowings and the
purchase of each equity tranche would be subject to Southwall's satisfaction, in
Needham's reasonable discretion, of certain conditions. These conditions would
include, among other things, the receipt of concessions from creditors and
landlords, completion of certain restructuring actions and the achievement of
cash flow break-even at quarterly revenue levels below those of third quarter
2003. There is no assurance, however, that any of these conditions will be
satisfied.
The board has appointed George Boyadjieff to succeed Joseph B. Reagan as
Southwall chairman effective on December 18, 2003. Dr. Reagan will remain on
the board. Mr. Boyadjieff is the chairman emeritus and recently retired chief
executive officer of Varco International, Inc. (NYSE:VRC), a diversified
oilfield equipment manufacturer and service provider with over $1.3 billion in
fiscal 2002 revenues.
For a complete description of the Needham bank guarantee and equity financing
package, please refer to Southwall's Form 8-K, to be filed with the Securities
and Exchange Commission on or about December 22, 2003, which will include as
exhibits the investment agreement and loan documents. The descriptions of those
documents in this press release are qualified in their entirety by reference to
the actual documents.
About Southwall Technologies Inc.
Southwall Technologies Inc., designs and produces thin film coatings that selectively absorb, reflect or
transmit light. Southwall products are used in a number of automotive,
electronic display and architectural glass products to
enhance optical and thermal performance characteristics, improve user comfort
and reduce energy costs. Southwall is an ISO 9001:2000-
certified manufacturer and exports advanced thin film
coatings to over 25 countries around the world. Southwall's customers include
Audi, BMW, DaimlerChrysler, Hewlett-Packard, Mitsubishi Electric, Mitsui
Chemicals, Peugeot-Citroën, Pilkington, Renault, Saint-
Gobain SEKURIT, and Volvo.
About Needham & Company
Needham & Company, Inc. is a leading U.S. investment banking,
securities and asset management firm focused primarily on serving emerging
growth industries and their investors. Further information is available at
www.needhamco.com.
About Dolphin Asset Management
Dolphin Asset Management Corp. is a New York-based asset management firm
investing exclusively in micro-cap opportunities.
This press release may contain forward-looking statements
as that term is defined in the Private Securities
Litigation Reform Act of 1995, including, without limitation, statements
regarding the company's expectations, beliefs, intentions, or strategies
regarding the future. All forward-looking statements in this press release are
based on information available to the company on the date hereof, and the
company assumes no obligation to update any such forward-looking statements.
These statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those presented, specifically that the
conditions for Needham's obligations to provide one or more of the guarantees or
to buy some or all of the company's preferred stock will not be satisfied or
that such guarantees will otherwise not be provided or that such shares will
otherwise not be purchased; that the conditions for Dolphin's obligations to buy
some of the company's preferred stock will not be satisfied, that the company's
lenders, landlords, lessors, vendors, or other creditors will not agree to
amendments of their arrangements with the company that are satisfactory to
Needham or at all; that Southwall will not have enough authorized capital stock
to fulfill its obligations to Needham and Dolphin which may result in damages or
the inability of Southwall to sell the company's preferred stock, that the
guarantees and the proceeds from the stock sales described herein will not be
sufficient to allow Southwall to meet its obligations or otherwise remain
liquid; that the company will default under its credit facility or under
agreements with Needham or Dolphin; that the company will not receive an
exemption from the Nasdaq National Market stockholder approval requirements;
that Southwall's common stock may be voluntarily or involuntarily removed from
listing on the Nasdaq National Market; that the company's circumstances will
trigger defaults under one or more of its borrowing arrangements; and that the
transactions contemplated in this release will have a material adverse effect on
the trading price of Southwall's common stock, as well as risks associated with
the company's failure to meet covenants under credit facilities and strains on
its liquidity. The failure of Southwall to satisfy the conditions to the
completion of the financing package, including entering into satisfactory
arrangements with its landlords and other creditors, will have a material
adverse effect on Southwall's future viability. Further risks are detailed in
the company's filings with the Securities and Exchange Commission, including
those set forth in the company's most recent Annual Report on Form 10-K for the
year ended December 31, 2002, filed on March 31, 2003; its Quarterly Report on
Form 10-Q for the quarter ended September 28, 2003, filed on November 17, 2003,
as amended by its Quarterly Report Form 10-Q/A, filed on November 19, 2003; its
Current Reports on Form 8-K, filed on December 9, 2003 and December 16, 2003,
respectively; and its Current Report on Form 8-K to be filed on or about
December 22, 2003.
###
EX-99
10
exh99-2.htm
EXHIBIT 99.2
INVESTMENT AGREEMENT
This Investment Agreement is entered into and dated as of December 18,
2003 (this `Agreement'), by and among Southwall Technologies Inc., a
Delaware corporation (`Southwall'), Needham & Company, Inc., a
Delaware corporation, (`Needham & Company'), and Needham Capital
Partners III, L.P., a Delaware limited partnership, Needham Capital Partners
IIIA, L.P., a Delaware limited partnership, and Needham Capital Partners III
(Bermuda), L.P., a limited partnership organized and existing under the laws of
Bermuda (each, individually, an `NCP Entity' and, collectively, `NCP
Entities'), and Dolphin Direct Equity Partners, LP, a Delaware limited
partnership `(Dolphin'). Each NCP Entity and Dolphin may from time to
time be referred to herein individually as a `Preferred Shares Purchaser'
and collectively as the `Preferred Shares Purchasers').
RECITALS
- Southwall needs additional funds to maintain its operations, and Needham
& Company and the Preferred Shares Purchasers have indicated their
willingness to provide Southwall with a financing package in order for Southwall
to maintain its operations.
- Pursuant to the terms of that certain Domestic Factoring Agreement, as
amended (the `Domestic Factoring Agreement') and that certain Export-
Import Bank Factoring Agreement, as amended (the `EX-IM Agreement' and
collectively with the Domestic Factoring Agreement, the `Bank
Agreements'), by and between Southwall and Pacific Business Funding, a
division of Cupertino National Bank (the `Bank'), Southwall has borrowed,
as of the date hereof, approximately $4,200,000. In connection with the
transactions contemplated hereby, the Bank and Southwall have entered into a
Forbearance Agreement (the `Forbearance Agreement') and have, among other
things, agreed to amend the Bank Agreements to reduce the amount of availability
thereunder from $10,000,000 to $7,000,000 (the `Amendment').
- In connection with the execution of the Forbearance Agreement, the Bank has
indicated its willingness to lend additional amounts to Southwall under a Loan
and Security Agreement (as defined below), which provides for an extension of
credit of up to $3,000,000 so long as Needham & Company executes a guaranty
of Southwall's payment obligations under the Loan and Security Agreement.
- In addition, the Preferred Shares Purchasers, have indicated their
willingness to purchase equity from Southwall if, among other things, Southwall
completes certain restructuring actions.
THE PARTIES AGREE AS FOLLOWS:
DEFINITIONS
1.1 Definitions. In addition to the terms defined
elsewhere in this Agreement, the following terms shall have the meanings set
forth in this Section 1.1:
`Action' means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting Southwall or
any Subsidiary or any of their respective properties before or by any Person,
court, arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
`Affiliate' means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
`Bankruptcy Event' means any of the following events:
(a) Southwall or any Subsidiary commences a case or other proceeding under
any bankruptcy, reorganization, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to Southwall or any Subsidiary thereof; (b) there is commenced
against Southwall or any Subsidiary any such case or proceeding;
(c) Southwall or any Subsidiary is adjudicated by a court of competent
jurisdiction insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered; (d) Southwall or any
Subsidiary suffers any appointment of any custodian or the like for it or any
part of its property; (e) under applicable bankruptcy law Southwall or any
Subsidiary makes a general assignment for the benefit of creditors;
(f) Southwall or any Subsidiary fails to pay, or states that it is unable
to pay or is unable to pay, its debts generally as they become due;
(g) Southwall or any Subsidiary calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts; or
(h) Southwall or any Subsidiary, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing; provided that, with respect to (f) and (g) above and (h) solely as it
relates to (f) and (g), no action or inaction on the part of Southwall or its
Subsidiaries that has been agreed to by the parties in the Transaction Documents
or that has been approved by Needham & Company and/or NCP in writing shall
constitute a Bankruptcy Event including, but not limited to, the renegotiation
of leases and agreements to defer and/or extend payment terms with creditors and
lenders on terms agreed to in writing by Needham & Company and/or NCP
Entities.
`Business Day' means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
`Capital Lease Obligations' of any Person shall mean the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
`Certificate of Designation' means that Certificate of Designation,
Preferences and Rights of 10% Cumulative Convertible Preferred Stock, in the
form attached as Exhibit A hereto, setting forth the terms and conditions
of the Series A Preferred Stock.
`Closing,' when used generically herein, means the Closing of any of
the extensions of credit and purchases and sale of Securities pursuant to
Section 2.1. Specific Closings provided for under this Agreement and subject to
its terms and conditions are the Initial Extension of Credit Closing, the Second
Extension of Credit Closing, the Initial Equity Closing and the Second Equity
Closing.
`Closing Date' means the Business Day immediately following the date
on which all the conditions set forth in Article 6 hereof applicable to a
Closing are satisfied or waived.
`Commission' means the Securities and Exchange Commission.
`Common Stock' means the common stock of Southwall, $0.001 par value
per share, and any securities into which such common stock may hereafter be
reclassified.
`Common Stock Equivalents' means any securities of Southwall or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any time,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
`Default' means the occurrence of any Event of Default.
`Disclosure Schedule' means the disclosure schedule of Southwall dated
as of the date of this Agreement provided to Needham & Company and the
Preferred Shares Purchasers.
`Dolphin Initial Equity Warrants' means common stock purchase warrants
in the form of Exhibit D hereto issued in favor of Dolphin for an
aggregate of 313,705 shares of Common Stock.
`Dolphin Second Equity Warrants' means common stock purchase warrants
in the form of Exhibit D hereto issued in favor of Dolphin for an
aggregate of 250,964 shares of Common Stock.
`Event of Default' means any of the following:
- Southwall shall fail to pay the principal and/or interest accrued thereon
under the Bank Agreements or the Loan and Security Agreement on or before the
expiration of any applicable grace periods;
- Southwall or any of its Subsidiaries shall fail to pay any obligations on
other Indebtedness when due other than, as set forth in the Restructuring Plan,
Indebtedness owed to Teijin Limited (including any amounts owed to Teijin
Limited as a trade creditor) or The Sanwa Bank Ltd., or any other Indebtedness
agreed to by Needham & Company in writing.
- Southwall breaches in any material respect any covenant contained in this
Investment Agreement, any other of the Transaction Documents, or the Bank
Agreements and such breach is not cured within 3 Business Days;
- Any representation or warranty made by Southwall herein or in any other
Transaction Document (or in any certificate or other writing furnished in
connection with any Transaction Document) shall not have been true and correct
in all material respects (without giving effect to any qualifications as to
materiality contained therein) (except for such representations and warranties
that speak as of a particular date, which shall have been true and correct as of
the date when made) and such inaccuracy is not cured within 10 days after such
representation or warranty becomes inaccurate;
- The occurrence of any Bankruptcy Event, and, in the event of a Bankruptcy
Event that was commenced by a party other than Southwall, such case or
proceeding shall not have been dismissed within 90 days;
- Any Transaction Document shall fail to be the legal and valid, obligation
and agreement of Southwall;
- Any of Southwall or its Subsidiaries shall be liquidated, dissolved, wound
up or cease to exist for any reason whatsoever, or any of Southwall or its
Subsidiaries shall elect, undertake or resolve to do so; or
- Southwall shall default in the payment of principal of or interest on any
Indebtedness for borrowed money in an amount greater than $50,000 or default in
the performance of any other term, condition or agreement respecting any such
Indebtedness and the other party thereto shall have accelerated the maturity
thereof;
provided that no action or inaction on the part of Southwall or its
Subsidiaries that has been agreed to by the parties in the Transaction Documents
or that has been approved by Needham & Company and/or NCP in writing shall
constitute an Event of Default including, but not limited to, the renegotiation
of leases and agreements to defer and/or extend payment terms with creditors and
lenders on terms agreed to in writing by Needham & Company and/or
NCP.
`Exchange Act' means the Securities Exchange Act of 1934, as
amended.
`Guarantee' of or by any Person shall mean any obligation, contingent
or otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the `primary obligor') in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (b) to purchase property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness, provided, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
`Indebtedness' of any Person shall mean, without duplication,
(a) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid,
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property or assets purchased by such Person,
(e) all obligations of such Person issued or assumed as the deferred
purchase price of property or services (other than trade debt in a total amount
not more than $7,500,000 at any time incurred in the ordinary course of business
and repayable in accordance with customary trade practices), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(i) all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements and (j) all obligations of such Person as an
account party in respect of letters of credit and bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any partnership in
which such Person is a general partner.
`Initial Equity Closing' means the closing of the Initial Equity which
shall take place, subject to the terms and conditions of this Agreement
(including satisfaction or waiver of conditions), between January 4, 2004, and
the Initial Equity End Date.
`Initial Extension of Credit' means the initial extension of credit by
Needham & Company up to $2,250,000 pursuant to the Loan and Security
Agreement.
`Initial Extension of Credit Closing' means the closing of the Initial
Extension of Credit pursuant to Section 2.2.
`Initial Extension of Credit Warrant' means a common stock purchase
warrant in the form of Exhibit D hereto for 941,115 shares of Common
Stock issued to Needham & Company.
`Loan and Security Agreement' means the Loan and Security Agreement by
and between Southwall and the Bank, dated as of the date of this Agreement,
attached as Exhibit B hereto.
`Losses' means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of preparation
of legal action and reasonable attorneys' fees.
`Material Subsidiary' means Southwall Europe GMBH.
`Needham & Company and NCP Counsel' means Heller Ehrman White
& McAuliffe LLP.
`NCP Entities Initial Equity Warrants' means common stock purchase
warrants in the form of Exhibit D hereto issued in favor of the NCP
Entities for an aggregate of 627,410 shares of Common Stock.
`NCP Entities Second Equity Warrants' means common stock purchase
warrants in the form of Exhibit D hereto issued in favor of the NCP
Entities for an aggregate of 501,928 shares of Common Stock.
`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.
`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 in writing.
`Registration Rights Agreement' means the Registration Rights
Agreement, dated as of the date of this Agreement, among Southwall and Needham
& Company and Southwall and the Preferred Shares Purchasers, in the form of
Exhibit C hereto.
`Restructuring Plan' shall mean the restructuring plan of Southwall
and its Subsidiaries attached as Disclosure Schedule A hereto.
`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.
`Second Equity Closing' means the closing of the Second Equity which
shall take place, subject to the terms and conditions of this Agreement
(including satisfaction or waiver of conditions), between April 10, 2004 and the
Second Equity End Date.
`Second Extension of Credit' means the extension by Needham &
Company of additional credit up to $750,000 pursuant to the Loan and Security
Agreement.
`Second Extension of Credit Closing' means the Closing of the Second
Extension of Credit which shall take place, subject to the terms and conditions
of this Agreement (including satisfaction or waiver of conditions), between
January 2, 2004 and the Second Extension of Credit end date.
`Second Extension of Credit Warrant' means the Warrant in the form of
Exhibit D hereto for 941,115 shares of Common Stock issued to Needham
& Company.
`Securities' means the Series A Preferred Stock, the Warrants and the
Underlying Shares issuable to Needham & Company and the Preferred Shares
Purchasers pursuant to the Transaction Documents.
`Securities Act' means the Securities Act of 1933, as amended.
`Series A Preferred Stock' means the preferred stock of Southwall, par
value $0.001 per share, with the designations, preferences and rights as set
forth in the Certificate of Designation.
`Southwall Counsel' means Choate Hall & Stewart.
`Southwall Material Adverse Effect.' An event, circumstance,
violation, inaccuracy, or other matter will be deemed to have a `Southwall
Material Adverse Effect' if such event, circumstance, violation, inaccuracy,
or other matter had, has or could reasonably be expected to have a material
adverse effect on (i) the business, condition (financial or otherwise),
general affairs, capitalization, assets, liabilities, operations, financial
performance or prospects of Southwall and its Subsidiaries, as a whole,
(ii) the ability of Southwall to consummate the transactions contemplated
by the Transaction Documents or to perform any of its obligations under the
Transaction Documents, or (iii) the ability of Needham & Company or the
Preferred Shares Purchasers to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the Common Stock, Series A
Preferred Stock or Warrants, other than (a) changes, effects or
circumstances that (1) result from changes in general economic or debt or
equity market conditions that do not affect the Company disproportionately,
(2) are the result of factors generally affecting the Company's industry or
are the result of any changes in any regulation or statute that has or could
reasonably be expected to have an industry-wide effect, or (3) result from
the consummation of transactions contemplated hereby or any of the actions
required to be taken by the Company hereunder or the seeking or receiving of a
hardship exemption from Nasdaq with respect to its stockholder approval
requirements, (b) any adverse change in the Company's stock price, and
(c) changes in GAAP or changes in laws or regulations or the interpretation
thereof.
`Subsidiary' means any corporation, partnership, joint venture, or
other entity more than 50% of whose equity interests (measured by virtue of
voting rights) is owned by Southwall.
`Trading Day' means (i) a day on which the Common Stock is traded
on a Trading Market, or (ii) if the Common Stock is not listed on a Trading
Market, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) 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 to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
`Trading Market' means any other national securities exchange, market
or trading or quotation facility on which the Common Stock is then listed or
quoted.
`Transaction Documents' means this Agreement, the Warrants, the
Certificate of Designation, the Series A Preferred Stock, the Registration
Rights Agreement, the Loan and Security Agreement, the Forbearance Agreement and
any other documents or agreements executed or delivered in connection with the
transactions contemplated hereunder.
`Underlying Shares' means the shares of Common Stock issuable upon
exercise of the Warrants, conversion of the Series A Preferred Stock, and in
satisfaction of any other obligation of Southwall to issue shares of Common
Stock pursuant to the Transaction Documents.
`Warrant' means a Common Stock purchase warrant in the form of
Exhibit D.
EXTENSIONS OF CREDIT, PURCHASE AND SALE
2.1 Closings. Closings shall occur two business days after the
conditions set forth in Article VI, as applicable, have been satisfied or
waived. Closings shall occur at 9:00 a.m. local time at the offices of Needham
& Company and NCP's Counsel. Subject to the terms and conditions set forth
in this Agreement, the following Closings shall occur:
- Initial Extension of Credit Closing
. At the Initial Extension
of Credit Closing, Needham & Company will grant the Initial Extension of
Credit in accordance with the terms of the Loan and Security Agreement.
- Second Extension of Credit Closing
. At the Second Extension of
Credit Closing, Needham & Company will grant the Second Extension of Credit
in accordance with the terms of the Loan and Security Agreement.
- Initial Equity Closing
. At the Initial Equity Closing,
Southwall shall issue and sell to the NCP Entities, and the NCP Entities shall
purchase from Southwall, an aggregate of 1,000,000 shares of Series A Preferred
Stock, which shall be issued in amounts designated by the NCP Entities prior to
or at the Initial Equity Closing. At the Initial Equity Closing, Southwall shall
issue and sell to Dolphin, and Dolphin shall purchase from Southwall 500,000
shares of Series A Preferred Stock.
- Second Equity Closing
. At the Second Equity Closing, Southwall
shall issue and sell to the NCP Entities, and the NCP Entities shall purchase
from Southwall, an aggregate of 2,000,000 shares of Series A Preferred Stock,
which shall be issued in amounts designated by the NCP Entities prior to or at
the Second Equity Closing. At the Second Equity Closing, Southwall
shall issue and sell to Dolphin, and Dolphin shall purchase from Southwall
1,000,000 shares of Series A Preferred Stock.
- Initial Extension of Credit Closing Deliveries.
- At the Initial Extension of Credit Closing, Southwall shall deliver
or cause to be delivered to Needham & Company the following:
- A copy of the Loan and Security Agreement executed by Southwall and the
Bank;
- The Initial Extension of Credit Warrant;
- A copy of the Registration Rights Agreement executed by Southwall;
- A certified copy of the Certificate of Designation as filed with the
Secretary of State of the State of Delaware;
- The legal opinion of Southwall Counsel, in a form reasonably agreed to by
the parties, executed by such counsel and delivered to Needham & Company and
the Preferred Shares Purchasers;
- A certificate from a duly authorized officer certifying on behalf of
Southwall that each of the conditions set forth in Sections 6.1 and 6.2 has
been satisfied or waived; and
- A check or evidence of wire transfer to Heller Ehrman White &
McAuliffe in the amount of $50,000.
- At the Initial Extension of Credit Closing, (i) Needham & Company shall
grant the Initial Extension of Credit in accordance with the terms of the Loan
and Security Agreement and (ii) Needham & Company and NCP shall deliver or
cause to be delivered to Southwall (A) the Registration Rights Agreement with
Southwall, duly executed by Needham & Company and by the Preferred Shares
Purchasers, (B) a certificate from a duly authorized officer certifying on
behalf of Needham & Company that each of the conditions set forth in Section
6.6 has been satisfied or waived and (C) the common stock purchase warrant dated
November 11, 2003 issued by Southwall in favor of Needham &
Company for an aggregate of 1,254,235 shares of Common Stock.
- Second Extension of Credit Closing Deliveries.
- Subject to the terms and conditions set forth in this Agreement, on
the Second Extension of Credit Closing Date, Southwall shall deliver or cause to
be delivered to Needham & Company the following:
- The Second Extension of Credit Warrant; and
- A certificate from a duly authorized officer certifying on behalf of
Southwall that each of the conditions set forth in Sections 6.1 and 6.3
has been satisfied or waived.
- Subject to the terms and conditions set forth in this Agreement, at the
Second Extension of Credit Closing, (i) Needham & Company shall grant to
Southwall the Second Extension of Credit in accordance with the terms of the
Loan and Security Agreement and (ii) Needham & Company shall deliver to
Southwall a certificate from a duly authorized officer certifying on behalf of
Needham & Company that each of the conditions set forth in Section 6.6 has
been satisfied or waived.
Initial Equity Closing Deliveries.
Subject to the terms and conditions set forth in this Agreement, on
the Initial Equity Closing Date, Southwall shall sell an aggregate of 1,000,000
shares of Series A Preferred Stock to the NCP Entities and shall deliver or
cause to be delivered to the NCP Entities the following:
- NCP Entities Initial Equity Warrants, issued in the amounts designated by
the NCP Entities prior to or at the Initial Equity Closing;
- Certificate(s) registered in the name of the NCP Entities for an aggregate
of 1,000,000 shares of Series A Preferred Stock, issued in the amounts
designated by the NCP Entities prior to or at the Initial Equity Closing;
and
- A certificate from a duly authorized officer certifying on behalf of
Southwall that each of the conditions set forth in Sections 6.1 and 6.4
has been satisfied or waived.
Subject to the terms and conditions set forth in this Agreement, at the
Initial Equity Closing, (i) the NCP Entities shall purchase an aggregate of
1,000,000 shares of Series A Preferred Stock from Southwall and shall deliver or
cause to be delivered to Southwall $1,000,000 in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by Southwall for such purpose and (ii) NCP Entities shall deliver
to Southwall a certificate from a duly authorized officer certifying on behalf
of NCP Entities that each of the conditions set forth in Section 6.6 has been
satisfied or waived.
Subject to the terms and conditions set forth in this Agreement, on the
Initial Equity Closing Date, Southwall shall sell an aggregate of 500,000 shares
of Series A Preferred Stock to Dolphin and shall deliver or cause to be
delivered to Dolphin the following:
- Dolphin Initial Equity Warrant; and
- Certificate(s) registered in the name of Dolphin for 500,000 shares of
Series A Preferred Stock; and
- A certificate from a duly authorized officer certifying on behalf of
Southwall that each of the conditions set forth in Sections 6.1 and 6.4
has been satisfied or waived;
Subject to the terms and conditions set forth in this Agreement, at the
Initial Equity Closing, (i) Dolphin shall purchase an aggregate of 500,000
shares of Series A Preferred Stock from Southwall and shall deliver or cause to
be delivered to Southwall $500,000 in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing by
Southwall for such purpose and (ii) Dolphin shall deliver to Southwall a
certificate from a duly authorized officer certifying on behalf of Dolphin that
each of the conditions set forth in Section 6.6 has been satisfied or
waived.
Second Equity Closing Deliveries.
Subject to the terms and conditions set forth in this Agreement, at
the Second Equity Closing, Southwall shall sell an aggregate of 2,000,000 shares
of Series A Preferred Stock to NCP Entities and deliver or cause to be delivered
to NCP Entities the following:
- NCP Entities Second Equity Warrants, issued in the amounts designated by the
NCP Entities prior to or at the Second Equity Closing; and
- Certificate(s) registered in the name of the NCP Entities for an aggregate
of 2,000,000 shares of Series A Preferred Stock of Southwall, issued in the
amounts designated by the NCP Entities prior to or at the Second Equity
Closing;
- A certificate from a duly authorized officer certifying on behalf of
Southwall that each of the conditions set forth in Sections 6.1 and 6.5 has
been satisfied or waived.
Subject to the terms and conditions set forth in this Agreement, at the
Second Equity Closing, (i) the NCP Entities shall purchase an aggregate of
2,000,000 Shares of Series A Preferred Stock from Southwall and shall
deliver or cause to be delivered to Southwall $2,000,000 in United States
dollars and in immediately available funds, by wire transfer to an account
designated in writing by Southwall for such purpose and (ii) NCP Entities
shall deliver to Southwall a certificate from a duly authorized officer
certifying on behalf of NCP Entities that each of the conditions set forth in
Section 6.6 has been satisfied or waived.
Subject to the terms and conditions set forth in this Agreement, on the
Second Equity Closing Date, Southwall shall sell an aggregate of 1,000,000
shares of Series A Preferred Stock to Dolphin and shall deliver or cause to be
delivered to Dolphin the following:
- Dolphin Second Equity Warrant; and
- Certificate(s) registered in the name of Dolphin for 1,000,000 shares of
Series A Preferred Stock; and
- A certificate from a duly authorized officer certifying on behalf of
Southwall that each of the conditions set forth in Sections 6.1 and 6.4
has been satisfied or waived.
Subject to the terms and conditions set forth in this Agreement, at the
Initial Equity Closing, (i) Dolphin shall purchase an aggregate of
1,000,000 shares of Series A Preferred Stock from Southwall and shall deliver or
cause to be delivered to Southwall $1,000,000 in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by Southwall for such purpose and (ii) Dolphin shall deliver to
Southwall a certificate from a duly authorized officer certifying on behalf of
Dolphin that each of the conditions set forth in Section 6.6 has been satisfied
or waived.
Obligations. The obligations of the Preferred
Shares Purchasers to purchase the Series A Preferred Stock shall be several and
not joint.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Southwall. Southwall
hereby makes the following representations and warranties to Needham &
Company and the Preferred Shares Purchasers:
- Subsidiaries
. Except as set forth in Disclosure Schedule
3.1(a), Southwall does not directly or indirectly control or own any
interest in any other corporation, partnership, joint venture or other business
association or entity. Except as disclosed in Disclosure Schedule 3.1(a),
Southwall owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction (collectively,
`Liens'), and all the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights. None of Southwall's Subsidiaries, other than
the Material Subsidiary, has any material assets or liabilities or is material
to the business, operations, condition (financial or otherwise) or prospects of
Southwall. None of the Subsidiaries, other than the Material Subsidiary,
conducts, or has conducted in the past three years, any business.
- Organization and Qualification
. Each of Southwall and the
Material Subsidiary is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither Southwall nor the Material Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Southwall
and the Material Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the failure to be so qualified could reasonably be expected to result in a
Southwall Material Adverse Effect.
- Authorization; Enforcement
. Southwall has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by Southwall and the consummation by it of the
transactions contemplated hereunder and thereunder have been duly authorized by
all necessary action on the part of Southwall and no further consent or action
is required by Southwall, its Board of Directors or its stockholders other than
as contemplated by Section 4.16 and any stockholder approval that may be
required by the rules applicable to companies listed on the Nasdaq National
Market. Each of the Transaction Documents has been (or upon delivery will be)
duly executed by Southwall and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of Southwall
enforceable against Southwall in accordance with its terms.
- No Conflicts
. The execution, delivery and performance of the
Transaction Documents by Southwall and the consummation by Southwall of the
transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of Southwall's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents other than as contemplated by Section 4.16,
or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both could reasonably be expected to become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any material agreement, credit facility, debt or other instrument (evidencing a
Southwall or Material Subsidiary debt or otherwise) or other understanding to
which Southwall or the Material Subsidiary is a party or by which any material
property or asset of Southwall or the Material Subsidiary is bound or affected
(other than such defaults or other rights as shall have been waived or amended
away prior to the consummation of the applicable transaction), or
(iii) other than violations that could not reasonably be expected to result
in a Southwall Material Adverse Effect, result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which Southwall or the Material Subsidiary is
subject (including federal and state securities laws and regulations) and the
rules and regulations of any self-regulatory organization to which Southwall or
its securities are subject other than any stockholder approval that may be
required by the rules applicable to companies listed on the Nasdaq National
Market, or by which any property or asset of Southwall or the Material
Subsidiary is bound or affected.
- Filings, Consents and Approvals
. Southwall is not 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 Southwall of the Transaction Documents,
other than the filing of the Certificate of Designation with the Secretary of
State of the State of Delaware, the filing of requisite notices to and receipt
of approvals and waivers from the Nasdaq National Market, and the filing of a
Form D with the Commission.
- Issuance of the Securities
. Other than contemplated by Section
4.16, the Securities have been duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens. Other than as
contemplated by Section 4.16, Southwall has reserved from its duly authorized
capital stock a number of shares of Common Stock to be issued to Needham &
Company or the Preferred Shares Purchasers, as applicable, upon conversion or
exercise of the Series A Preferred Stock or Warrants.
- Capitalization
. The number of shares and type of all
authorized, issued and outstanding capital stock of Southwall, and all shares of
capital stock reserved for issuance under Southwall's various option and
incentive plans, is set forth in Disclosure Schedule 3.1(g). Except as
set forth in Disclosure Schedule 3.1(g), no securities of Southwall are
entitled to preemptive or similar rights, and no Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities and except as
disclosed in Disclosure Schedule 3.1(g), there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or 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 Southwall is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as set forth in Disclosure
Schedule 3.1(g), the issue and sale of the Securities will not,
immediately or with the passage of time, obligate Southwall to issue shares of
Common Stock or other securities to any Person (other than the Needham &
Company and the Preferred Shares Purchasers) and will not result in a right of
any holder of Southwall securities to adjust the exercise, conversion, exchange
or reset price under such securities.
- SEC Reports; Financial Statements
. Southwall has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the 24 months preceding the date hereof
(the foregoing materials being collectively referred to herein as the `SEC
Reports' and, together with this Agreement and the Schedules to this
Agreement, the `Disclosure Materials') on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. Southwall has made
available to Needham & Company and the Preferred Shares Purchasers a copy of
all SEC Reports filed within the 10 days preceding the date hereof. As of
their respective dates, the SEC Reports 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
Reports, 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. The financial statements of Southwall included
in the SEC Reports 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 (`GAAP'), except as may be
otherwise specified in such financial statements or the notes thereto or in the
case of unaudited financial statements, as permitted by Form 10-Q of the
Commission, and fairly present in all material respects the financial position
of Southwall and its consolidated Subsidiaries 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, immaterial, year-end
audit adjustments. All material contracts, as such contracts are defined in
&sec:601(a)(10) of Reg. S-K under the Securities Act, to which Southwall or
the Material Subsidiary is a party or to which the property or assets of
Southwall or any Subsidiary are subject are included as part of or specifically
identified in the SEC Reports.
- Press Releases
. As of their respective dates, the press
releases disseminated by Southwall during the 24 months preceding the date of
this Agreement taken as a whole did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
- Material Changes
. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Southwall Material Adverse Effect, (ii) Southwall has not incurred any
liabilities (contingent or otherwise) other than (A) as of the date hereof,
trade payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) as of the date hereof, liabilities
not required to be reflected in Southwall's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission,
(iii) as of the date hereof, Southwall has not altered its method of
accounting or the identity of its auditors, (iv) Southwall has not declared
or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, and (v) Southwall has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Southwall stock option and stock purchase plans, a warrant to purchase
shares of Common Stock to NCP which has terminated and the Warrants and Series A
Preferred Stock issued or to be issued to Needham & Company and the
Preferred Shares Purchasers pursuant to this Agreement. Other than as set forth
on Disclosure Schedule 3.1(j), Southwall does not have pending before the
Commission any request for confidential treatment of information.
- Litigation
. Except as set forth on Disclosure Schedule
3.1(k), as of the date hereof, none of Southwall or its Subsidiaries is
party to any Action or Proceeding. There is no Action pending that adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents, the Bank Agreements, or the Securities. As of the date
hereof, neither Southwall nor any Subsidiary, nor any director or officer
thereof, is currently the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of Southwall, there is
not pending or contemplated, any investigation by the Commission involving
Southwall or any current or former director or officer of Southwall. During the
last three years, the Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by Southwall
under the Exchange Act or the Securities Act.
- Labor Relations
. No material labor dispute exists or, to the
knowledge of Southwall, is imminent with respect to any of the employees of
Southwall or the Material Subsidiary.
- Compliance
. Except as set forth in Disclosure Schedule
3.1(m) and except in each case as could not, individually or in the
aggregate, reasonably be expected to result in a Southwall Material Adverse
Effect, neither Southwall nor the Material Subsidiary is (i) in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, could reasonably be expected to
result in a default by Southwall or the Material Subsidiary under), nor has
Southwall or any Subsidiary received notice of a claim that it is in default
under or that it is 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 (whether or not such default or violation has been
waived), (ii) in violation of any order of any court, arbitrator or
governmental body, and (iii) in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters. Southwall is in compliance in all material
respects with the applicable requirements of the Sarbanes-Oxley Act of 2002 and
the rules and regulations thereunder promulgated by the Commission.
- Regulatory Permits
. Southwall and the Material Subsidiary
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or could reasonably be expected to result in a Southwall Material Adverse
Effect (`Material Permits'), and neither Southwall nor the Material
Subsidiary has received notice of proceedings relating to the revocation or
modification of any Material Permit.
- Title to Assets
. Southwall and the Material Subsidiary have
good and marketable title in fee simple to all real property owned by them that
is material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except for Liens granted to the Bank
pursuant to the Factoring Agreement, liens set forth in Disclosure Schedule
3.1(o), and except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by Southwall and its Subsidiaries. Any real property and
facilities held under lease by Southwall or the Material Subsidiary are held by
it under valid, subsisting and enforceable leases of which Southwall and the
Material Subsidiary are in compliance in all material respects.
- Patents and Trademarks
. Southwall and the Material Subsidiary
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could, individually or in the aggregate, have or reasonably
be expected to result in a Southwall Material Adverse Effect (collectively, the
`Intellectual Property Rights'). To the knowledge of Southwall, the
Intellectual Property Rights used by Southwall and the Material Subsidiary do
not violate or infringe upon the rights of any Person. To the knowledge of
Southwall, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights.
- Proprietary Information of Third Parties
. No third party has
claimed in writing to Southwall or the Material Subsidiary that any Person
employed by or affiliated with any of Southwall or the Material Subsidiary has
(a) violated or may be violating to any extent any of the terms or conditions of
such Person's employment, non-competition or non-disclosure agreement with such
third party, (b) disclosed or may be disclosing or utilized or may be utilizing
any trade secret or proprietary information or documentation of such third
party, or (c) interfered or may be interfering in the employment relationship
between such third party and any of its present or former employees.
- Product Liability
. Except as set forth on Disclosure
Schedule 3.1(r) or as reserved for in the SEC Reports, all products sold,
distributed, installed, used, delivered or held in inventory in connection with
the business of Southwall and the Material Subsidiary (including, without
limitation, all documentation furnished in connection therewith) conform in all
material respects with all applicable contractual commitments and with all
express and implied warranties, and neither Southwall nor the Material
Subsidiary have any material liability and cost (and there is no basis for any
present or future proceeding giving rise to any liability and cost) for
replacement or repair thereof or other damages in connection therewith. Except
as set forth on Disclosure Schedule 3.1(r), no product sold, distributed,
used or delivered by Southwall or the Material Subsidiary in connection with
their respective businesses is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale.
- Insurance
. Southwall and the Material Subsidiary are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which
Southwall and the Material Subsidiary are engaged.
- Transactions With Affiliates and Employees
. Except as set
forth in SEC Reports, none of the officers or directors of Southwall and, to the
knowledge of Southwall, none of the employees of Southwall or the Material
Subsidiary is presently a party to any transaction with Southwall or the
Material Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of Southwall, any entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
- Internal Accounting Controls
. Southwall and the Material
Subsidiary maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
- Certain Fees
. No brokerage or finder's fees or commissions are
or will be payable by Southwall to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. Neither Needham & Company
nor the Preferred Shares Purchasers shall have any obligation with respect to
any fees or with respect to any claims (other than such fees or commissions owed
by Needham & Company or the Preferred Shares Purchasers pursuant to written
agreements executed by Needham & Company or the Preferred Shares Purchasers,
which fees or commissions shall be the sole responsibility of Needham &
Company or the Preferred Shares Purchasers, as applicable) 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.
- Certain Registration Matters
. Assuming the accuracy of the
representations and warranties of Needham & Company and the Preferred Shares
Purchasers set forth in Sections 3.2(b) and (c), no registration under the
Securities Act is required for the offer and sale of the Securities by Southwall
to Needham & Company or the Preferred Shares Purchasers under the
Transaction Documents. Except as described in Disclosure
Schedule 3.1(w), Southwall has not granted or agreed to grant to any
Person any rights (including `piggyback' registration rights) to have any
securities of Southwall registered with the Commission or any other governmental
authority that have not been satisfied.
- Listing and Maintenance Requirements
. Southwall has not, in
the two years preceding the date hereof, received notice from the Trading Market
to the effect that Southwall is not in compliance with the listing or
maintenance requirements thereof.
- Investment Company.
Southwall is not, and is not an Affiliate
of, an `investment company' within the meaning of the Investment Company Act of
1940, as amended.
- Disclosure
. Southwall understands and confirms that Needham
& Company and the Preferred Shares Purchasers each will rely on the
foregoing representations and covenants in effecting transactions in securities
of Southwall. All disclosure provided to Needham & Company and the Preferred
Shares Purchasers in writing regarding Southwall, its business and the
transactions contemplated hereby, furnished by or on behalf of Southwall
(including Southwall's representations and warranties set forth in this
Agreement) are true and correct in all material respects and 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.
- Acknowledgment Regarding Purchase of Securities by Needham &
Company and the Preferred Shares Purchasers
. Southwall acknowledges and
agrees that each of Needham & Company and the Preferred Shares Purchasers is
acting solely in the capacity of an arm's length finance provider with respect
to the Transaction Documents and the transactions contemplated hereby and
thereby. Southwall further acknowledges that none of Needham & Company nor
the Preferred Shares Purchasers is acting as a financial advisor or fiduciary of
Southwall (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by
either of Needham & Company, the Preferred Shares Purchasers or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby is merely incidental to the
purchase of the Securities by Needham & Company and the Preferred Shares
Purchasers, respectively. Southwall further represents to each of Needham &
Company and the Preferred Shares Purchasers that Southwall's decision to enter
into this Agreement has been based solely on the independent evaluation by
Southwall, its Board of Directors and its representatives.
- Seniority
. Other than as set forth in Disclosure Schedule
3.1(bb), as of the date hereof, no Indebtedness of Southwall or the Material
Subsidiary is senior to or pari passu with the Indebtedness under the Bank
Agreements, or the Loan and Security Agreement in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise.
3.2 Representations and Warranties of Needham & Company and the
Preferred Shares Purchasers. Each of Needham & Company and the
Preferred Shares Purchasers hereby represent and warrant, severally and not
jointly, to Southwall as follows:
(a) Organization; Authority. Each of Needham & Company
and each of the Preferred Shares Purchasers is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution, delivery and performance by Needham & Company
and/or the Preferred Shares Purchasers of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate action by Needham
& Company, and other applicable like action by each of the Preferred Shares
Purchasers. Each of this Agreement and the applicable Registration Rights
Agreement has been duly executed by Needham & Company and the Preferred
Shares Purchasers, and when delivered by Needham & Company and the Preferred
Shares Purchasers in accordance with terms hereof, will constitute the valid and
legally binding obligation of each of Needham & Company and the Preferred
Shares Purchasers, respectively, enforceable against it in accordance with its
terms.
(b) Accredited Investor Status. At the time each of Needham
& Company and each of the Preferred Shares Purchasers was offered the
Securities, it was, and at the date hereof and as of each Closing Date (if any),
it is, and on each date on which it exercises the Warrants it will be, an
`accredited investor' as defined in Rule 501(a) under the Securities Act
and will have acquired the Securities for investment purposes only and not with
a view to the resale or distribution thereof.
(c) Suitability of Investment
(i) Needham & Company and the Preferred Shares Purchasers are
each aware that the Securities have not been registered under the Securities
Act, that such offer and sale are intended to be exempt from registration under
the Securities Act and the rules promulgated thereunder by the Commission, and
that the Securities may not be offered, sold, assigned, transferred or otherwise
disposed of unless they are registered under the Securities Act or an exemption
from such registration is available. Needham & Company and the Preferred
Shares Purchasers are each also aware that sales or transfers of the Securities
are subject to further restrictions by state securities laws and the provisions
of the Transaction Documents.
(ii) Needham & Company and the Preferred Shares Purchasers each has
such knowledge and experience in financial, business and tax matters that it is
capable of evaluating the merits and risks relating to the investment in the
Securities and making an investment decision with respect to Southwall.
(iii) Each of Needham & Company and the Preferred Shares Purchasers
has been given the opportunity to obtain information and documents relating to
Southwall and to ask questions of and receive answers from representatives of
Southwall concerning Southwall and its investment in Southwall.
(iv) Each of Needham & Company and the Preferred Shares Purchasers is
able at this time, and in the foreseeable future, to bear the economic risk of a
total loss of its investment in Southwall.
(v) Each of Needham & Company and the Preferred Shares Purchasers is
aware that there are substantial risks incident to an investment in the
Securities.
(vi) Each of Needham & Company and the Preferred Shares Purchasers are
aware that in the foreseeable future Southwall may be de-listed from The Nasdaq
Stock Market.
(d) Filings, Consents and Approvals. Each of Needham &
Company and the Preferred Shares Purchasers is not 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 it of the Transaction Documents other than post-
closing notice filings.
OTHER AGREEMENTS OF THE PARTIES
- Federal and State Securities Loans.
- Each of Needham & Company and the Preferred Shares Purchasers
agree that the Securities will only be offered, sold, assigned, transferred,
exchanged or otherwise disposed of in compliance with state and federal
securities laws and the Transaction Documents.
- Each of Needham & Company and the Preferred Shares Purchasers agree that
the certificates evidencing the Securities will contain the following legend, so
long as is required by this Section 4.1(b) or Section 4.1(c):
THESE SECURITIES 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO SOUTHWALL. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES, BUT SOUTHWALL MAY REQUIRE A
LEGAL OPINION IN CONNECTION WITH A SUBSEQUENT TRANSFER FOLLOWING DEFAULT BY THE
TRANSFEREE OF THE PLEDGE.
Southwall acknowledges and agrees that each of Needham & Company and
the Preferred Shares Purchasers may from time to time pledge, and/or grant a
security interest in some or all of the Securities pursuant to a bona fide
margin agreement in connection with a bona fide margin account and, if required
under the terms of such agreement or account, each of Needham & Company and
the Preferred Shares Purchasers, as applicable, may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval or consent of Southwall and no legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but Southwall may require such legal opinion in connection with
a subsequent transfer following default by the transferee of the pledge and the
Securities would still be subject to this Section 4.1. No notice shall be
required of such pledge. At the expense of Needham & Company or the
Preferred Shares Purchasers, as applicable, Southwall will execute and deliver
such reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder.
- Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) following any
sale of such Underlying Shares pursuant to Rule 144, or (ii) while
such Underlying Shares are eligible for sale under Rule 144(k), or
(iii) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). Following the Effective Date or at such earlier
time as a legend is no longer required for the Underlying Shares under this
Section 4.1(c), Southwall will, no later than three Trading Days following
the delivery by Needham & Company and/or the Preferred Shares Purchasers to
Southwall or Southwall's transfer agent of a certificate representing the
Underlying Shares containing a restrictive legend, deliver or cause to be
delivered to Needham & Company and/or the Preferred Shares Purchasers, as
applicable, a certificate representing such Underlying Shares that is free from
all restrictive and other legends. Southwall may not make any notation on its
records or give instructions to any transfer agent of Southwall that enlarge the
restrictions on transfer set forth in this Section.
Furnishing of Information. As long as each of Needham &
Company or the Preferred Shares Purchasers owns the Securities issued or
issuable to it that are not registered under the Securities Act or eligible for
sale under Rule 144(k), Southwall covenants to use commercially reasonable
efforts to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by Southwall after
the date hereof pursuant to the Exchange Act. Upon the request of any such
Person, Southwall shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with the preceding sentence. As
long as Needham & Company or the Preferred Shares Purchasers owns
Securities, if Southwall is not required to file reports pursuant to such laws,
it will prepare and furnish to Needham & Company and/or the Preferred Shares
Purchasers, as applicable, and make publicly available in accordance with
Rule 144(c) such information as is required for Needham & Company or
the Preferred Shares Purchasers, as applicable, to sell the Underlying Shares
under Rule 144. Southwall further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
Acknowledgment of Dilution. Southwall acknowledges that the
issuance of the Securities (including the Underlying Shares) will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial. Southwall further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue the
Securities (including the Underlying Shares) pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of set
off, counterclaim, delay or reduction, regardless of the effect of any such
dilution or any claim that Southwall may have against either of Needham &
Company or the Preferred Shares Purchasers.
Integration. Southwall shall not, and shall use commercially
reasonable efforts to ensure that no Affiliate of Southwall shall, 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 Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to Needham & Company or the Preferred Shares Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
Listing of Securities. If the Common Stock is listed on any
Trading Market, Southwall shall: (i) in the time and manner required by
each Trading Market on which the Common Stock is listed, prepare and file with
such Trading Market an additional shares listing application covering the
Underlying Shares, (ii) take all steps necessary to cause such shares to be
approved for listing on each Trading Market on which the Common Stock is listed
as soon as possible thereafter, and (iii) provide to either of Needham
& Company or the Preferred Shares Purchasers evidence of such listing.
Reservation of Shares; Issuance of Shares. Southwall shall
maintain a reserve from its duly authorized shares of Common Stock to comply
with its conversion and exercise obligations under the Series A Preferred Stock
and the Warrants pursuant to the Transaction Documents. Southwall shall not
issue any equity or warrants, options, rights or other instruments exercisable,
convertible or exchangeable into equity of Southwall to any trade creditor,
other creditor, landlord, employee, director, agent or consultant until such
time as Southwall has received approval of its stockholder increasing the
authorized number of shares of Common Stock issuable under its certificate of
incorporation as contemplated by Section 4.16 of this Agreement.
Securities Laws Disclosure; Publicity. By 8:30 a.m. (New York
City time) on the Trading Day following each Closing Date, if any, Southwall
shall issue a press release reasonably acceptable to Needham & Company or
the Preferred Shares Purchasers, as applicable, disclosing the transactions
contemplated hereby. In addition, Southwall will make such other filings and
notices in the manner and time required by the Commission and the Trading Market
on which the Common Stock is listed. Notwithstanding the foregoing, Southwall
shall not publicly disclose the name of either of Needham & Company or the
Preferred Shares Purchasers, or include the name of either of Needham &
Company or the Preferred Shares Purchasers in any filing with the Commission
(other than the Registration Statement and any exhibits to filings made in
respect of this transaction in accordance with periodic filing requirements
under the Exchange Act) or any regulatory agency or Trading Market, without the
prior written consent of Needham & Company and/or the Preferred Shares
Purchasers, as applicable, except to the extent such disclosure is required by
law or Trading Market regulations, in which case Southwall shall provide Needham
& Company or the Preferred Shares Purchasers, as applicable, with prior
notice of such disclosure, and notice is hereby given that Southwall will
disclose the names of Needham & Company and the Preferred Shares Purchasers
in filings with the Commission, regulatory agencies and Trading Markets, as
required by law or applicable regulations.
Use of Proceeds. Southwall shall use the net proceeds from the
extensions of credit and sale of the Securities, if any, hereunder for general
corporate and working capital purposes.
Inspection. So long as Needham & Company or NCP
owns shares of Series A Preferred Stock or any amounts remain outstanding under
an Extension of Credit, Southwall shall permit each of Needham & Company and
NCP, at the expense of each, upon two days prior notice, to visit and inspect
Southwall's and the Subsidiaries' properties, to examine their books of account
and records and to discuss Southwall's affairs, finances, and accounts with its
officers, all at such reasonable times as may be requested; provided, however,
that Southwall shall not be obligated pursuant to this Section to provide any
information which it reasonably considers to be a trade secret or confidential
information.
Issuance of Final Warrant. On April 30, 2004, whether or not
there is a Second Equity Closing, Southwall shall issue to the NCP Entities
Warrants for an aggregate of 501,928 shares of Common Stock, which shall be
issued in the amounts designated by the NCP Entities prior to or at the issuance
thereof, and a Warrant for 250,964 shares of Common Stock to Dolphin; provided
however, that if the Second Equity Closing shall have occurred Southwall shall
not be obligated to issue such warrants.
Hardship Exemption. Immediately after the execution and
delivery of this Agreement Southwall shall use commercially reasonable efforts
to apply for and a secure a hardship exemption from The Nasdaq Stock Market that
waives any requirement that issuance of securities under this Agreement be
approved by Southwall stockholders.
Restructuring Plan. Southwall shall use its commercially
reasonable efforts to take all actions necessary to complete the Restructuring
Plan within the timeline set forth in the Restructuring Plan.
Investor Representation at Board Meetings. For so long as Needham
& Company or any of its Affiliates owns 5% or more of the Common Stock (on a
fully diluted basis) or any amounts remain outstanding under the Loan and
Security Agreement, Southwall shall notify each of Needham & Company and NCP
of meetings of the Southwall board of directors and deliver minutes of each such
meeting as if each were a director. Needham & Company and NCP may
collectively designate one Person to attend all board meetings and to speak or
otherwise participate in such meetings to the extent permitted by the board;
provided, however, that such Person may disclose or use any information made
known by virtue of such notice, minutes, or attendance only to the extent
consistent with the fiduciary obligations of a director of Southwall, whether or
not such Person actually is a director and that such Person shall sign such
Confidentiality Agreement as Southwall may reasonably request.
Additional Warrants.
- Debt Issuances
. If, in connection with its restructuring
efforts as set forth in the Restructuring Plan, Southwall issues notes or other
debt instruments to any of its creditors, then Southwall shall issue to Needham
& Company and the Preferred Shares Purchasers Warrants representing the
right to purchase that number of shares of Common Stock equal to the product of
(x) 1.25 and (y) the original principal amount of such note or debt instrument.
Southwall shall divide such Warrants among Needham & Company and the
Preferred Shares Purchasers as requested by Needham & Company and the
Preferred Shares Purchasers at the time of issuance, subject to the allocation
rules set forth in paragraph (c) below.
- Equity Issuances
. If, as part of its restructuring efforts as
set forth in the Restructuring Plan, Southwall issues any equity or warrants,
options, rights or other instruments exercisable, convertible or exchangeable
into equity of Southwall to any trade creditor, other creditor, landlord,
employee, director, agent or consultant (each, a `Restructuring Equity
Issuance'), then Southwall shall, at each Closing thereafter, issue
additional Warrants to each of Needham & Company and each of the Preferred
Shares Purchasers in such amounts that would allow Needham & Company and
each of the Preferred Shares Purchasers to maintain an aggregate ownership
percentage (on a fully-diluted basis and assuming exercise of all outstanding
warrants and conversion of all outstanding preferred stock and convertible debt
and any issuances related to the restructuring including, without limitation,
issuances of options or rights to the management of Southwall) of Southwall
Common Stock as if the Restructuring Equity Issuance or Restructuring Equity
Issuances had not occurred. If, due to the prohibitions set forth in Section 4.6
of this Agreement, Southwall is unable to make Restructuring Equity issuances
and a particular Closing occurs, then the right to receive additional Warrants
as a result of a Restructuring Equity Issuance shall be deferred until such time
as the Restructuring Equity Issuance occurs, and if the Restructuring Equity
Issuance occurs after the Second Equity Closing, then the all of the Warrants
shall be issued at that time.
- Maximum Equity Position
. Dolphin shall receive one-third of
any Warrants issued under this Section 4.14, and Needham & Company and NCP
Entities, together, will receive two-thirds or any such Warrants; provided,
however, that if the issuances contemplated in this Section 4.14, plus all of
the equity securities of Southwall owned by Needham & Company and the NCP
Entities aggregated together exceed 49% of the outstanding Southwall Common
Stock (on a fully-diluted basis and assuming exercise of all outstanding
warrants and conversion of all outstanding preferred stock and convertible debt
and any issuances related to the restructuring including, without limitation,
issuances of options or rights to the management of Southwall), then the number
of shares issuable upon exercise of the Warrants allocable to Dolphin shall be
increased and the number of shares issuable upon exercise of Warrants allocable
to Needham & Company and the NCP Entities under this paragraph shall be
proportionally reduced so that Needham & Company and NCP Entities will own
in the aggregate 49% of the outstanding Southwall Common Stock (on a fully-
diluted basis and assuming exercise of all outstanding warrants and conversion
of all outstanding preferred stock and convertible debt).
Certain Other Affirmative Covenants. So long as any
Indebtedness remains outstanding under the Loan and Security Agreement, unless
Needham & Company otherwise consents in writing (which Needham & Company
shall be entitled not to do in its sole discretion), Southwall and its
Subsidiaries, as applicable, shall, for the benefit of Needham &
Company:
- use commercially reasonable efforts to timely file all registration
statements, prospectuses, proxy or information statements, forms, reports or
other reports required to be filed under the Exchange Act or the Securities Act
with the Commission;
- deliver to Needham & Company, promptly upon becoming aware of the
existence of any Default or Event of Default, a written notice describing its
nature;
- comply with, and perform all obligations under, all of the Transaction
Documents in all material respects;
- discharge promptly all material taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or upon any of its
property, real, personal or mixed, before they shall become delinquent unless
such taxes, assessments, charges or levies are subject to protest in good faith
by Southwall; and all material claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar persons for labor, materials, supplies
and rent, and all liabilities arising under ERISA which if unpaid might by law
become a Lien unless such claims are subject to protest in good faith by
Southwall;
- take all reasonable steps to (i) maintain, preserve, protect and keep
all properties owned or held under lease by it in good repair, working order and
condition and make all needful and proper renewals, replacements, additions,
betterments and improvements thereto, so that the business carried on in
connection therewith may be conducted properly and efficiently at all times,
(ii) keep adequately insured all its property and assets, and (iii) do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises except to the extent that
failure to do so could not reasonably be expected to result in a Southwall
Material Adverse Effect;
- take all action reasonably necessary to comply with (i) all laws,
ordinances, governmental rules and regulations to which it is or might become
subject and which the failure to comply with could reasonably be expected to
result in a Southwall Material Adverse Effect; and (ii) obtain all patents,
trademarks, service-marks, tradenames, servicenames, copyrights, licenses,
permits, franchises and other governmental authorizations which are necessary to
the ownership of its property or the conduct of its business except to the
extent that failure to do so could not reasonably be expected to result in a
Southwall Material Adverse Effect; and
- pay, discharge, or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, all its material obligations and
liabilities of whatever nature except as set forth in the Restructuring
Plan.
Stockholders Meeting.
- Promptly after the execution and delivery of this Agreement, Southwall will
take all action necessary to call a meeting of its stockholders (the
`Stockholders Meeting') for the purpose of seeking approval of an
amendment to its certificate of incorporation increasing the number of
authorized shares available for issuance (the `Proposal'). In connection
therewith Southwall will promptly prepare and file with the Commission proxy
materials (including a proxy statement and form of proxy) for use at the
Stockholders Meeting and, promptly after receiving clearance from the
Commission, shall promptly mail such proxy materials to the stockholders of
Southwall. Southwall will comply with Section 14(a) of the 1934 Act and the
rules promulgated thereunder in relations to any proxy statement (as amended or
supplemented, the `Proxy Statement') and any form of proxy to be sent to
the stockholders in connection with the Stockholders Meeting.
- Southwall's Board of Directors shall recommend to Southwall's stockholders
that the stockholders vote in favor of and approve the Proposal at the
Stockholders Meeting and will set the date of the Stockholders Meeting no later
than 25 days after receiving clearance of the proxy materials from the
Commission, and shall cause Southwall to use commercially reasonable efforts to
solicit the approval of the stockholders for the Proposal. Southwall is
required, and will take, in accordance with applicable law and its certificate
of incorporation and bylaws, all actions necessary to convene the Stockholders
Meeting along the timeframe indicated herein to consider and vote upon the
approval of the Proposal.
NEGATIVE COVENANTS
- Negative Covenants.
So long as any Indebtedness remains
outstanding under the Loan and Security Agreement, unless Needham & Company
otherwise consents in writing (which Needham & Company shall be entitled not
to do in its sole discretion), Southwall shall not, and shall not permit its
Subsidiaries to:
- engage in any business other than the business of developing, manufacturing
and marketing thin film coatings for the automotive glass, electronic display
and architectural markets;
- other than with respect to the Series A Preferred Stock, declare, pay or set
aside any dividends on any shares of Southwall or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, retirement or other acquisition of any shares of Southwall, whether
now or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
Southwall;
- enter into any arrangement with any Person whereby Southwall shall sell or
transfer any property, real or personal, whether now owned or hereafter
acquired, and thereafter rent or lease such property or other property which
Southwall intends to use for substantially the same purpose or purposes as the
property being sold or transferred, if such arrangement would result in
Southwall's retention of such property for a period in excess of six months from
the date of commencement of such lease;
- make or permit to remain outstanding any loan or advance to, or guarantee or
endorse or otherwise be or become contingently liable, directly or indirectly,
for or in connection with, the obligations, shares or dividends of, or own,
purchase or acquire any shares, obligations or securities of, or any interest
in, or make or maintain any capital contribution to, any Person other than its
Subsidiaries;
- enter into any transaction, including, without limitation, the purchase,
sale or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of business and pursuant to the
reasonable requirements of Southwall's business and upon fair and reasonable
terms no less favorable to Southwall than Southwall would obtain in a comparable
arm's length transaction with a Person not an Affiliate; and/or
- modify, amend or change in any manner the Certificate of Designation as
filed with the Secretary of State of the State of Delaware.
CONDITIONS
- Conditions Precedent to the Obligations of Needham & Company or the
Preferred Shares Purchasers at each Closing Date.
The obligations of Needham & Company or the Preferred Shares
Purchasers, as applicable, at a Closing, if any, are subject to the satisfaction
or waiver by Needham & Company and/or the Preferred Shares Purchasers, as
applicable, at or before such Closing, of each of the following conditions:
- Representations and Warranties
. Each of the representations
and warranties of Southwall contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date (except for such representations and warranties that
speak as of a particular date which shall have been true and correct as of the
date when made);
- Performance
. Southwall shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing;
- Loan and Security Agreement
. The Loan and Security Agreement
by and between Southwall and the Bank, and the related Forbearance Agreement and
guaranty executed by Needham & Company, shall have been entered into, shall
not have been modified without the consent of Needham & Company, and shall
remain in full force and effect;
- No Injunction
. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, or promulgated by
any court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;
- Bankruptcy Event.
No Bankruptcy Event shall have
occurred.
- No Defaults
. Neither Southwall nor any of its Subsidiaries
shall be in violation or breach of or in default in any material respect with
respect to any provision of this Agreement, the Bank Agreements, the Amendment,
the Loan and Security Agreement, the other documents executed in connection with
this Agreement, the Transaction Documents and/or any other document executed by
Southwall to which either the Bank, NCP or Needham & Company is a
party;
- No Action or Proceeding.
Since the date hereof, no Action or
Proceeding against Southwall or any of its officers and directors shall have
commenced or been threatened in connection with the transactions contemplated by
the Transaction Documents or could reasonably be expected to have a Southwall
Material Adverse Effect; and
- Adverse Changes
. Since the date of this Agreement, no
Southwall Material Adverse Effect shall have occurred and be
continuing.
- Conditions Precedent to the Obligations of Needham & Company on
the Initial Extension of Credit Closing Date.
The obligations of Needham & Company at the Initial Extension of
Credit Closing are subject to the satisfaction or waiver by Needham &
Company, at or before the Closing, of the following condition:
- Appointment of Mr. Boyadjieff
. Southwall shall have named Mr.
George Boyadjieff as its non-executive chairman of the board of directors, Mr.
Boyadjieff shall have accepted such position.
- Matters relating to Creditors.
Needham and Southwall shall
have reached agreement in principle with respect to the arrangements that will
be offered to Southwall's creditors, trade creditors and landlords.
- Conditions Precedent to the Obligations of Needham & Company on
the Second Extension of Credit Closing Date.
The obligations of Needham & Company at the Second Extension of
Credit Closing are subject to the satisfaction or waiver by Needham &
Company, at or before the Closing, of each of the following conditions:
- Releases
. Southwall shall have secured releases from its Tempe
landlord and the Tempe equipment lessor releasing Southwall from all claims and
liabilities on terms reasonably satisfactory to Needham & Company; and
- Agreements with Creditors
. Southwall shall have entered into
arrangements with its trade creditors, other creditors and landlords (including,
without limitation, (i) Teijin Limited in its capacity as a trade creditor and
as the holder of $1.25 million of debt of Southwall that it paid to The Sanwa
Bank Ltd. in connection with a guaranty of Southwall's obligations to The Sanwa
Bank Ltd. and (ii) the landlords of its leases in Palo Alto with respect to such
leases) deferring and/or extending payment terms on terms reasonably
satisfactory to Needham & Company.
- Conditions Precedent to the Obligations of the Preferred Shares
Purchasers on the Initial Equity Closing Date.
The obligations of the Preferred Shares Purchaser at the Initial
Equity Closing are subject to the satisfaction or waiver by the Preferred Shares
Purchaser, at or before the Initial Equity Closing, of each of the following
conditions:
- Restructuring
. Southwall shall have completed in all material
respects the Restructuring Plan;
- Occurrence of Earlier Closings
. The Initial and Second
Extension of Credit Closings between Southwall and Needham & Company shall
have taken place; and
- Certificate of Designation
. The Certificate of Designation
shall not have been modified, amended or changed and shall be in full force and
effect.
- Conditions Precedent to the Obligations of the Preferred Shares
Purchasers at the Second Equity Closing Date.
The obligations of the Preferred Shares Purchasers at the Second
Equity Closing are subject to the satisfaction or waiver by the Preferred Shares
Purchasers, at or before such Closing, of each of the following conditions:
- Revenue Target
. Southwall shall have derived at least $10
million in revenue during the first quarter of 2004 from existing business lines
(excluding revenue from LCD AR on TAC and Class B PDP);
- Cash Flow Target
. Southwall's net loss (as calculated under
GAAP) for the first quarter of 2004 excluding depreciation, amortization and
non-cash asset impairment and restructuring charges shall be equal to or less
than $200,000;
- Occurrence of Earlier Closings
. The Initial and Second
Extension of Credit Closings and the Initial Equity Closings shall have taken
place; and
- Certificate of Designation
. The Certificate of Designation
shall not have been modified, amended or changed and shall be in full force and
effect.
- Conditions Precedent to the Obligations of Southwall on any Closing
Date.
The obligations of Southwall at any Closing are subject to the
satisfaction or waiver by Southwall, at or before such Closing, of each of the
following conditions:
- Representations and Warranties
. The representations and
warranties of Needham & Company or the Preferred Shares Purchasers, as
applicable, contained herein shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made on and as of
such date; and
- Performance
. Needham & Company or the Preferred Shares
Purchasers, as applicable, shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by Needham
& Company or the Preferred Shares Purchasers at or prior to the
Closing.
MISCELLANEOUS
- Termination
. This Agreement may be terminated prior to the Second
Equity Closing under any of the following circumstances:
- by mutual written consent of Southwall, the Preferred Shares Purchasers and
Needham;
- by either Needham & Company and the Preferred Shares Purchasers or
Southwall if a court or other governmental body of competent jurisdiction shall
have issued a final and nonappealable order, decree or ruling, or shall have
taken any other action, having the effect of permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by the Transaction
Documents;
- by Southwall if: (i) any of the representations and warranties of Needham
& Company or the Preferred Shares Purchasers shall have been inaccurate as
of the date of this Agreement in any material respect (without giving effect to
any qualifications as to materiality contained therein); (ii) any of the
representations and warranties Needham & Company or the Preferred Shares
Purchasers become inaccurate in any material respect (without giving
effect to any qualifications as to materiality contained therein) as of a date
subsequent to the date of this Agreement (as if made on such subsequent date)
and Needham & Company or the Preferred Shares Purchasers, as applicable,
shall not have cured such inaccuracy within ten days after such representation
or warranty becomes inaccurate; or (iii) any of the covenants of Needham &
Company or the Preferred Shares Purchasers contained in this Agreement shall
have been breached in any material respect;
- by Needham & Company and the Preferred Shares Purchasers or Southwall
if: (i) the Initial Extension of Credit Closing has not occurred by December 19,
2003 (the `Initial Extension of Credit End Date'); (ii) the Second
Extension of Credit Closing has not occurred by January 15, 2004 (the `Second
Extension of Credit Closing End Date'); (iii) the Initial Equity Closing has
not occurred by January 31, 2004 (the `Initial Equity End Date') or (iv)
if the Second Equity Closing has not occurred by April 30, 2004 (the `Second
Equity End Date'), unless, in each case, the failure of a Closing to occur
is attributable to a failure by the party seeking to terminate this Agreement to
perform any material obligation required to be performed by such party at or
prior to such End Date;
- by Needham & Company and the Preferred Shares Purchasers if: (i) any of
Southwall's representations and warranties shall have been inaccurate in any
material respect (without giving effect to any qualifications as to materiality
contained therein) as of the date of this Agreement (except for such
representations and warranties that speak as of a particular date, which shall
have been true and correct as of the date when made); (ii) any of Southwall's
representations and warranties become inaccurate in any material respect
(without giving effect to any qualifications as to materiality contained
therein) as of a date subsequent to the date of this Agreement (as if made on
such subsequent date) and Southwall shall not have cured such inaccuracy within
ten days after such representation or warranty becomes inaccurate; or (iii) any
of Southwall's covenants contained in this Agreement shall have been breached in
any material respect;
- by Needham & Company and the Preferred Shares Purchasers if, since the
date of this Agreement, there shall have occurred and be continuing any
Southwall Material Adverse Effect; or
- by Needham & Company and the Preferred Shares Purchasers if a Bankruptcy
Event shall have occurred and, in the event of a Bankruptcy Event that was
commenced by a party other than Southwall, such case or proceeding shall not
have been dismissed within 90 days of being filed.
- Effect of Termination.
In the event of the termination of this
Agreement as provided in Section 7.1, this Agreement shall be of no further
force or effect; provided, however, that (i) Sections 7.2 through 7.19
shall survive the termination of this Agreement and shall remain in full force
and effect; and (ii) the termination of this Agreement shall not relieve any
party from any liability for any material inaccuracy in or breach of any
representation or any material breach of any warranty, covenant or other
provision contained in this Agreement.
- Fees and Expenses.
Except as specified in this Agreement, the
Registration Rights Agreement or the Loan and Security Agreement, 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 the Transaction
Documents. Southwall shall pay all stamp and other taxes and duties levied in
connection with the sale of the Securities.
- Entire Agreement.
The Transaction Documents, together with the
Exhibits and Schedules thereto, 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, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after each and any Closing, and without further consideration, each party will
execute and deliver to each other party, as applicable, such further documents
as may be reasonably requested in order to give practical effect to the
intention of the parties under the Transaction Documents.
- 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 (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to Southwall: Southwall Technologies Inc.
3975 East Bayshore Road
Palo Alto, CA 94304
Attn: Chief Executive Officer
Facsimile No.: (650) 962-9111
With a copy to (which copy shall not constitute notice):
Choate Hall & Stewart
53 State Street
Boston, MA 02109
Attn: James W. Hackett, Jr., Esq.
Facsimile No.: (617) 248-4000
If to Needham or
NCP Entities: Needham & Company, Inc.
445 Park Avenue
New York, NY 10022
Attn: Ellen McKay
Facsimile No.: (212) 751-1450
and
Needham Capital Partners
445 Park Avenue
New York, NY 10022
Attn: Ellen McKay
Facsimile No.: (212) 751-1450
With a copy to (which copy shall not constitute notice):
Heller Ehrman White & McAuliffe LLP
333 Bush Street
San Francisco, CA 94104
Attn: Victor A. Hebert, Esq.
Facsimile No.: (415) 772-6268
If to Dolphin: Dolphin Direct Equity Partners, LP
c/o Dolphin Asset Management Corp.
129 East 17th Street
New York, NY 10003
Attn: Carlos P. Salas
Facsimile No.: (212) 202-3817
or such other address as may be designated in writing hereafter,
in the same manner, by such Person.
- 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 all the parties 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 subsequent
default 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.
- Construction.
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. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. This
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement or any of the
Transaction Documents.
- Successors and Assigns.
This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. Southwall may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each of Needham & Company and
the Preferred Shares Purchasers. Each of Needham & Company and the Preferred
Shares Purchasers may assign its respective rights under this Agreement to any
Person to whom it assigns or transfers any Securities and each of the NCP
Entities may assign its rights and obligations hereunder to any entity
controlled by Needham & Company, and Dolphin may assign its rights and
obligations hereunder to an Affiliate.
- No Third-Party Beneficiaries.
This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
- Governing Law.
All questions concerning the construction,
validity, enforcement and interpretation of 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 agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the
`New York Courts'). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of the any
of the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If any party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other parties
for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
- Survival.
The representations, warranties, agreements and
covenants contained herein shall survive the Closings (if any) and the delivery,
exercise and/or conversion of the Securities, as applicable.
- 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.
- Severability.
If any provision of this Agreement is held to 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
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefore, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
- Rescission and Withdrawal Right.
Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever either of Needham & Company or the Preferred
Shares Purchasers exercises a right, election, demand or option under a
Transaction Document and Southwall does not timely perform its related
obligations in all material respects within the periods therein provided, then
Needham & Company or the Preferred Shares Purchasers, as applicable, may
rescind or withdraw, in its sole discretion from time to time upon written
notice to Southwall, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
- Replacement of Securities.
If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, Southwall
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefore, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to Southwall of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.
- Remedies.
In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, either of
Needham & Company and the Preferred Shares Purchasers or Southwall will be
entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of 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.
- Payment Set Aside.
To the extent that Southwall makes a
payment or payments to either of Needham & Company or the Preferred Shares
Purchasers pursuant to any Transaction Document or Needham & Company or the
Preferred Shares Purchasers enforces or exercises its rights thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to Southwall, a trustee, receiver or any
other person under any law (including, without limitation, any bankruptcy law,
state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
- Adjustments in Share Numbers and Prices.
In the event of any
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof but
prior to the Second Equity Closing, each reference in this Agreement to a number
of shares or a price per share shall be amended to appropriately account for
such event.
- Confidentiality
. Each of Needham & Company and the
Preferred Shares Purchasers agrees that, until December 31, 2004, it will
keep confidential and will not disclose, divulge or use for any purpose other
than to monitor its investment in Southwall any confidential, proprietary or
secret information which it may obtain from Southwall pursuant to financial
statements, reports and other materials submitted by Southwall to it pursuant to
this Agreement, or pursuant to visitation or inspection rights granted hereunder
(`Confidential Information'), unless such Confidential Information is
known, or until such Confidential Information becomes known, to the public
(other than as a result of a breach of this Section 7.19).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Investment Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
SOUTHWALL TECHNOLOGIES INC.
By:
Name: Thomas G. Hood
Title: Chief Executive Officer
NEEDHAM & COMPANY, INC.
By:
Name:
Title: Authorized Signatory
NEEDHAM CAPITAL PARTNERS III, L.P.
By:
Name:
Title: Authorized Signatory
NEEDHAM CAPITAL PARTNERS IIIA, L.P.
By:
Name:
Title: Authorized Signatory
NEEDHAM CAPITAL PARTNERS III (BERMUDA), L.P.
By:
Name:
Title: Authorized Signatory
DOLPHIN DIRECT EQUITY PARTNERS, LP
By:
Name:
Title: Authorized Signatory
[Signature Page to Investment Agreement]
Exhibit A
CERTIFICATE OF DESIGNATION
Exhibit B
LOAN AND SECURITY AGREEMENT
Exhibit C
REGISTRATION RIGHTS AGREEMENT
Exhibit D
FORM OF WARRANT
DISCLOSURE SCHEDULES
Attached hereto.
()
EX-99
11
exh99-6.htm
EXHIBIT 99.6
LOAN AND SECURITY AGREEMENT
by and among
PACIFIC BUSINESS FUNDING,
a division of CUPERTINO NATIONAL BANK
and
SOUTHWALL TECHNOLOGIES INC.,
a Delaware corporation
DATED AS OF December 18, 2003
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this `Agreement') is
made and entered into as of December 18, 2003, by and between PACIFIC BUSINESS
FUNDING, a division of Cupertino National Bank (`PBF'), and SOUTHWALL
TECHNOLOGIES INC., a Delaware corporation (`Borrower').
RECITALS
A. Borrower wishes to obtain credit from PBF for
general working capital purposes.
B. Subject to the representations and warranties of
Borrower herein and upon the terms and conditions set forth in this Agreement,
PBF is willing to extend credit to Borrower.
Agreement
NOW THEREFORE, in consideration of the foregoing recitals
and the terms and conditions and agreements contained herein, the parties hereby
agree as follows:
- Definitions and Construction.
- Definitions. As used in this Agreement, the
following terms shall have the following definitions:
`Accounts' means all presently existing and
hereafter arising accounts, accounts receivable, contract rights, and all other
forms of obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing.
`Advance' shall mean the advance of credit or
money made pursuant to the loan facilities referred to in this Agreement.
`Affiliate' means, with respect to any Person,
any Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person,
and each of such Person's senior executive officers, directors, and
partners.
`Borrower' has the meaning set forth in the
introductory paragraph hereof.
`Borrower's Books' means all of Borrower's
books and records including ledgers, records concerning Borrower's assets or
liabilities, the Collateral, business operations, or financial condition, and
all computer programs, or tape files, and the equipment containing such
information.
`Borrowing Base' means 100% of the face value
of the Letter of Credit.
`Business Day' means any day that is not a
Saturday, Sunday, or other day on which banks in the State of California are
authorized or required to close.
`Closing' shall mean the closing of the
transactions contemplated hereby. The Closing shall take place on the Closing
Date, all actions to take place at the closing must take place or none of them
shall be deemed to have taken place, and if all actions take place at the
Closing they shall be deemed to have taken place simultaneously.
`Closing Date' means the date of this
Agreement.
`Code' means the California Uniform Commercial
Code.
`Collateral' means the property described on
Exhibit B attached hereto, as well as all Proceeds, dividends,
profits or income derived from said property.
`Compliance Certificate' means a certificate
substantially in the form set forth in Exhibit D attached
hereto.
`Credit Limit' has the meaning set forth in
Section 2.1 hereof.
`Daily Balance' means the amount of the
Obligations owed at the end of a given day.
`Domestic Factoring Agreement' shall have the
meaning set forth in the Forbearance Agreement.
`Equipment' means all present and future
machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools,
parts, and attachments in which Borrower has any interest.
`ERISA' means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
`Ex-Im Factoring Agreement' shall have the
meaning set forth in the Forbearance Agreement.
`Financing Statements' means UCC-1 financing
statements and similar filings describing PBF as secured party and Borrower as
debtor, covering all or any portion of the Collateral, all of the foregoing in
such form, for filing or recording in such jurisdictions and with such filing
offices, as PBF shall reasonably deem necessary or advisable.
`Forbearance Agreement' means that certain
Forbearance Agreement between Borrower and PBF of even date herewith.
`GAAP' means generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other Person as may be approved by the significant
segment of the accounting profession, which are applicable to the circumstances
as of the applicable date of determination.
`Guarantor' means Needham & Company, Inc.,
a Delaware corporation.
`Guaranty' means that certain Guaranty of even
date herewith executed by Guarantor in favor of PBF, in form and substance
reasonably acceptable to PBF.
`Indebtedness' means (a) all indebtedness
for borrowed money or the deferred purchase price of property or services (other
than trade debt in a total amount not to exceed $7,500,000 at any time incurred
in the ordinary course of business and payable in accordance with customary
trade practices), including without limitation reimbursement and other
obligations with respect to surety bonds and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures, or similar instruments,
(c) all capital lease obligations, and (d) any and all contingent
obligations required to be disclosed in financial statements under GAAP.
`Insolvency Proceeding' means any proceeding
commenced by or against any person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
law, including any case, action, suit, or proceeding for the appointment of a
Receiver, any assignment for the benefit of creditors, any formal or informal
moratoria, compositions, or any proceedings seeking reorganization, arrangement,
liquidation, or other relief.
`Inventory' means all present and future
inventory in which Borrower has any interest, including merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process, and
finished products intended for sale or lease or to be finished under a contract
of service, of every kind and description now or at any time hereafter owned by
or in the custody or possession, actual or constructive, of Borrower, including
such inventory as is temporarily out of its custody or possession or in transit
and including any returns upon any Account or other Proceeds, including
insurance Proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the foregoing, and
including returned merchandise, merchandise shipped and not paid for,
merchandise shipped on consignment, and merchandise shipped but as to which
title has not been transferred.
`Investment' means any beneficial ownership of
(including stock, partnership interest, or other securities) any Person, or any
loan, advance, or capital contribution to any Person, including returned
merchandise, merchandise shipped and not paid for, merchandise shipped on
consignment, and merchandise shipped but as to which title has not been
transferred
`IRC' means the Internal Revenue Code of 1986,
as amended, and the regulations thereunder.
`Letter of Credit' means that certain
irrevocable standby letter of credit issued by Deutsche Bank in favor of PBF in
the form set forth in Exhibit F hereto, supporting the obligations of
Guarantor under the Guaranty.
`Lien' means any mortgage, lien, deed of trust,
charge, pledge, security interest, statutory lien, judgment lien, or other
encumbrance.
`Line of Credit' shall have the meaning set
forth in Section 2.1 below.
`Loan Documents' means, collectively, this
Agreement, the Promissory Note and any note or notes executed by Borrower to PBF
in connection with this Agreement, the Financing Statements, the Guaranty, and
any other agreement entered into between PBF and Borrower in connection with
this Agreement, all as amended or extended from time to time, or any document
directly pertaining to the transactions contemplated thereby.
`Material Adverse Effect' means a material
adverse effect on (i) the business operations or condition (financial or
otherwise) of Borrower and its Subsidiary taken as a whole, (ii) the value
of the Collateral, (iii) the priority of PBF's Liens in the Collateral, or
(iv) the ability of Borrower to repay the Obligations or otherwise perform
its obligations under the Loan Documents.
`Maturity Date' means May 5, 2004, unless this
Agreement is sooner terminated under the provisions hereof.
`Needham Agreement' means that certain
Investment Agreement dated on or about the date hereof, between Borrower and
Guarantor, as the same may be amended or replaced from time to time.
`Obligations' means all debt, principal,
interest, PBF Expenses, and other amounts owed to PBF by Borrower pursuant to
this Agreement or any of the other Loan Documents including, without limitation,
the Guaranty, and the Promissory Note, whether such amounts are absolute or
contingent, due or to become due, now existing or hereafter arising, including
any interest that accrues after the commencement of an Insolvency Proceeding and
including any debt, liability, or obligation owing from Borrower to others that
PBF may have obtained by assignment or otherwise.
`Payment Date' means Wednesday of each and
every week commencing with the Wednesday immediately following the Closing
Date.
`PBF' shall have the meaning set forth in the
introductory paragraph hereof.
`PBF Expenses' means the sum of Ten Thousand
Dollars ($10,000), plus all reasonable costs or expenses (including reasonable
attorneys' fees and expenses) incurred in connection with the preparation of
Loan Documents and ancillary costs incurred in connection with making of the
loan evidenced by this Agreement and all other documents referenced herein
(including without limitation filing fees, UCC search fees, and similar costs),
as well as in defense and enforcement of the Loan Documents, including
reasonable attorneys' fees and expenses whether or not suit is brought.
`Periodic Payments' means all installments or
similar recurring payments that Borrower may now or hereafter become obligated
to pay to PBF pursuant to the terms and provisions of this Agreement.
`Permitted Investment' means:
- Investments in Subsidiaries and
Investments existing on the Closing Date disclosed in the Schedule;
- (i) Marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency or any State thereof maturing within one (1) year from the date of
acquisition thereof, (ii) commercial paper maturing not more than one (1)
year from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., and (iii) certificates of deposit maturing no more than one (1)
year from the date of investment and shares of so-called `money market'
funds;
- Extensions of credit in the
nature of accounts receivable or notes receivable arising from the sale or lease
of goods or services in the ordinary course of business;
- Investments consisting of the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and
- Investments (including debt
obligations) received in connection with the bankruptcy or reorganization of
customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of
business.
`Person' means any individual, sole
proprietorship, partnership, limited liability company, joint venture, trust,
unincorporated organization, association, corporation, institution, public
benefit corporation, joint stock company, estate, entity, or governmental
agency.
`Prime Rate' means the variable rate of
interest, per annum, that is reported by the Wall Street Journal, Western
Edition from time to time as the `Prime Rate.'
`Proceeds' means all moneys received from the
issuance of common stock, preferred stock, or any other ownership security, or
subordinated debt instrument.
`Promissory Note' shall have the meaning set
forth in Section 2.1 hereof.
`Responsible Officer' means each of the Chief
Executive Officer, President, Chief Financial Officer or the Controller of
Borrower and each of the Director of Finance, Managing Director, Managing
Member, or the General Manager of Guarantor. Without limiting the generality of
the foregoing, Michael Seifert shall be deemed a Responsible Officer of
Borrower, and Glen Albanese shall be deemed a Responsible Officer of
Guarantor.
`Schedule' means the schedule of exceptions
attached hereto as Exhibit A, if any.
`SEC Documents' means the current and periodic
reports filed by Borrower with the Securities and Exchange Commission.
`Subsidiary' or `Subsidiaries'
means Southwall Europe GmbH, and any corporation, limited liability company, or
partnership in which (i) any general partnership interest, or
(ii) more than 50% of the stock or membership interests of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers,
or trustees of the entity shall, at the time as of which any determination is
being made, be owned by Borrower, either directly or through an Affiliate.
Notwithstanding the foregoing, `Subsidiary' or `Subsidiaries' shall not include
either Southwall Worldwide Glass, Inc. or Southwall Sunflex, Inc., each of which
Borrower represents and warrants to PBF are not operating subsidiaries, and have
no assets, revenue, or liabilities.
`Transfer' means sell, convey, assign,
hypothecate, lease, lend, transfer or otherwise dispose.
- Accounting Terms. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given such term in accordance with GAAP, and all financial data
required to be submitted by this Agreement shall be prepared and computed,
unless otherwise specifically provided herein, in accordance with GAAP. That
certain terms or computations are explicitly modified by the phrase `in
accordance with GAAP' shall in no way be construed to limit the foregoing. In
the event that GAAP changes during the term of this Agreement such that any
covenants contained in this Agreement would then be calculated in a different
manner or with different components, (a) the parties hereto agree to amend this
Agreement in such respects as are necessary to conform those covenants as
criteria for evaluating the Borrower's financial condition to substantially the
same criteria as were effective prior to such change in GAAP, and (b) Borrower
shall be deemed to be in compliance with those covenants during the sixty-day
period following any such change in GAAP if and to the extent that Borrower
would have been in compliance therewith under GAAP as in effect immediately
prior to such change.
- Loan
and Terms of Payment.
- Advances. Upon satisfaction of the conditions set
forth in Section 3, and otherwise subject to the terms and conditions of
this Agreement, and so long as no Event of Default shall have occurred and be
continuing, PBF agrees to make available to Borrower a line of credit in an amount not to exceed Three
Million Dollars ($3,000,000) (the `Credit Limit'), for general working
capital purposes (the `Line of Credit'). PBF shall make Advances to Borrower
under the Line of Credit from time to time not exceeding in the aggregate the
lesser of (i) the Credit Limit, or (ii) the Borrowing Base. Amounts borrowed
under this Section 2.1 may be repaid and reborrowed during the term of
this Agreement. As a condition to any disbursement under the Line of Credit,
Responsible Officers of both Borrower and Guarantor must authorize the
disbursement in writing in the form attached hereto as Exhibit E, and
Borrower shall deliver to PBF a Compliance Certificate in the form attached
hereto as Exhibit D, confirming compliance in all material respects with
the terms of this Agreement. To obtain an Advance, Borrower must notify PBF by
facsimile or telephone by 11:00 a.m. on the Business Day for which the Advance
is requested. Borrower must promptly confirm such notification in writing. PBF
may make Advances under this Agreement based on instructions from (x) a
Responsible Officer of Borrower or its designee, and (y) a Responsible Officer
of Guarantor or its designee. PBF may rely on any telephone notice given by a
person whom PBF believes is a Responsible Officer or designee. Borrower will
indemnify PBF from and against any loss PBF suffers as a result of such
reliance. Borrower's Obligations hereunder shall be evidenced by this Agreement
and by a promissory note in the form attached hereto as Exhibit C (the
`Promissory Note').
- Interest Rates, Payments, and
Calculations.
- Interest Rate. Except as
set forth in Section 2.2(b), all outstanding Obligations shall bear
interest, on the average Daily Balance, at a rate per annum equal to two percent
(2.00%) in excess of the Prime Rate, and shall be due and payable in arrears on
each Payment Date. The rate of interest applicable to the Loan shall change as
and when the Prime Rate changes.
- Default Interest. All
Obligations shall bear interest, from and after the occurrence of an Event of
Default, at a rate per annum equal to five (5.00) percentage points above the
interest rate applicable immediately prior to the occurrence of the Event of
Default. If and when the Event of Default is cured, the interest shall revert to
the previously applicable interest rate.
- Payments. Interest only
payments shall be due and payable on the Payment Date of each week during the
term hereof after the Closing Date, commencing with the Payment Date immediately
following the Closing Date. Where Borrower fails to make part or all of any such
payment on any Payment Date, PBF, in addition to any other rights and remedies
under this Agreement or otherwise, shall have the right to withdraw and apply
against all or any unpaid portion of any such payment first (i) any funds in
PBF's possession or control under the Domestic Factoring Agreement and/or the
Ex-Im Factoring Agreement, in PBF's sole discretion, and second (ii) funds held
in any depository account or accounts of Borrower with Cupertino National Bank.
Upon the Maturity Date, or upon earlier acceleration pursuant to the terms and
conditions of this Agreement, Borrower shall pay PBF all amounts due and
outstanding, including, but not limited to, the principal balance, unpaid
interest, and any unpaid PBF Expenses, reasonable attorneys fees and such other
costs and charges related to the Obligations incurred under this Agreement. Upon
the Maturity Date, or upon earlier acceleration pursuant to the terms and
conditions of this Agreement, PBF shall, at its option, charge interest, all PBF
Expenses, and all periodic payments that Borrower is obligated to pay PBF
hereunder against any of Borrower's accounts with PBF. PBF will promptly notify
Borrower of all debits which PBF makes against Borrower's accounts. Any such
debits against Borrower's accounts in no way shall be deemed a set-off. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
- Computation. In the event
the Prime Rate is changed from time to time hereafter, the applicable rate of
interest hereunder shall be increased or decreased effective as of 12:01 a.m. on
the day the Prime Rate is changed, by an amount equal to such change in the
Prime Rate. All interest chargeable under the Loan Documents shall be computed
on the basis of a three hundred sixty (360) day year for the actual number of
days elapsed.
- Usury. In no event shall
the amount paid or agreed to be paid by Borrower for the use, forbearance, or
detention of any money advanced hereunder exceed the highest lawful rate
permissible under applicable usury laws. In the event that performance of any
obligation of Borrower under this Agreement or any other document referred to
herein shall require the payment of interest in excess of such highest lawful
rate, then such obligation shall, automatically and retroactively to the date of
this Agreement, be deemed reduced to the highest lawful rate permissible under
applicable usury laws and the amount of any interest paid in excess of the
highest lawful rate shall be credited to principal and, to the extent that the
then principal balance is insufficient for such purpose, repaid to
Borrower.
- Crediting Payments. Prior
to the occurrence of an Event of Default, PBF shall credit a wire transfer of
funds, check or other item of payment to such deposit account or Obligations as
Borrower and Guarantor specify. After the occurrence of an Event of Default, the
receipt by PBF of any wire transfer of funds, check, or other item of payment
shall be immediately applied to conditionally reduce Obligations, but shall not
be considered a payment on account unless such payment is of immediately
available federal funds or unless and until such check or other item of payment
is honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by PBF after 12:00 noon
Pacific time shall be deemed to have been received by PBF as of the opening of
business on the immediately following Business Day. Whenever any payment to PBF
under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such
extension.
- PBF
Expenses. Borrower shall pay to PBF the following:
- Financial Examination and
Appraisal Fees. PBF's customary fees and out-of-pocket expenses for PBF's
audits of Borrower's Accounts, and for each appraisal of Collateral and
financial analysis and examination of Borrower performed from time to time by
PBF or its agents.
- PBF Expenses Through Closing
Date. Upon the date hereof, all PBF Expenses incurred through the
Closing Date; and
(c) PBF Expenses after Closing Date. After the date
hereof, all PBF Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.
- Additional Costs. In case any law, regulation,
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects PBF to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of PBF imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, PBF; or
(c) imposes upon PBF any other condition with respect to
its performance under this Agreement;
and the result of any of the foregoing is to increase the
cost to PBF, reduce the income receivable by PBF or impose any expense upon PBF
with respect to any loans, PBF shall notify Borrower thereof. Borrower agrees to
pay to PBF the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by PBF of a statement of the amount and setting
forth PBF's calculation thereof, all in reasonable detail, which statement shall
be deemed true and correct absent manifest error; provided however, that
Borrower shall not be liable for any such amount attributable to any period
prior to the date of one hundred eighty (180) days prior to the date of such
statement. Notwithstanding the foregoing, if Borrower repays all outstanding
Obligations within forty-five (45) days of the date of such certificate, no
amount shall be assessed by virtue of this Section 2.4.
- Reimbursement of Costs Upon Failure of Closing. If
the loan contemplated hereunder fails to close for any reason other than a
default by PBF under this Agreement, Borrower shall pay PBF all PBF Expenses
incurred by PBF in connection with the contemplated loan, this Agreement, and
any other Loan Documents prepared in contemplation of the contemplated
loan.
- Term. Except as otherwise set forth herein, this
Agreement shall become effective on the Closing Date and, subject to
Section 13.7 hereof, shall continue in full force and effect for a
term ending on the Maturity Date. Notwithstanding the foregoing, PBF shall have
the right to terminate any obligation to make any Advances under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding any termination, PBF's Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
- Conditions of Loan.
- Conditions Precedent to Loan. The obligation of PBF
to make the loan described herein is subject to the conditions precedent that
PBF shall have received each of the following:
- this Agreement, fully executed by
all the parties hereto;
- the Promissory Note, fully
executed by Borrower;
- the Guaranty, fully executed by Guarantor;
- the Letter of Credit, fully executed by Deutsche
Bank;
- a certificate by a Responsible
Officer of Borrower confirming Borrower's authorization and ability to execute,
enter into, and deliver this Agreement to PBF, in a form acceptable to
PBF;
- a certificate by a Responsible
Officer of Guarantor confirming Guarantor's authorization and ability to
execute, enter into, and deliver the Guaranty to PBF, in a form acceptable to
PBF;
- delivery of all Collateral that must be delivered or
endorsed over to PBF in accordance with the terms and conditions of this
Agreement, the Guaranty, or the Promissory Note;
- delivery of all Financing Statements, notification
materials, escrow instructions or other documents necessary to enforce, perfect
or provide notice of PBF's security interest in the Collateral;
- such other documents,
including without limitation Financing Statements under the UCC or California
law, and the completion of such other matters, as PBF may reasonably deem
necessary or appropriate; and
- copies of corporate, partnership, or limited liability
company resolutions, as applicable, of Borrower and Guarantor, in form and
substance acceptable to PBF.
- Additional Conditions to Closing. The obligation of
PBF to make the loan described herein is further subject to the following
conditions:
- the representations and
warranties contained in Section 7 hereof shall be true and correct
in all material respects on and as of the Closing Date as though made at and as
of such date, and no Event of Default shall have occurred and be
continuing;
- each of the documents and
instruments set forth in Section 3.1 hereof shall be in full force
and effect and shall not have been modified in any respect, except with the
written consent of PBF;
- Borrower shall have provided and
PBF shall have reviewed and approved any and all financial information
concerning Borrower reasonably requested by PBF; and
- Except as otherwise disclosed in writing to PBF, there
shall have been no material adverse change in the financial condition of, or
transfer of any interest in, Borrower or Guarantor since November 18,
2003.
- Creation of Security Interest.
- Grant
of Security Interest. Borrower hereby grants and pledges to PBF a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule, each
security interest constitutes a valid, security interest in the presently
existing Collateral, and will constitute a valid security interest in Collateral
acquired after the date hereof, in each case, to the extent that a security
interest in such Collateral can be perfected by the filing of a Financing
Statement, or, in the case of Collateral consisting of instruments, documents,
chattel paper or certificated securities, to the extent that PBF takes
possession of such Collateral. The security interest in the Collateral created
hereunder shall be subject and subordinate to PBF's security interest in the
Collateral (or any portion thereof) both (i) under the Domestic Factoring
Agreement, and (ii) under the Ex-Im Factoring Agreement, but shall be subject to
no prior security interests in favor of any other party whatsoever. Borrower
acknowledges that PBF may place a `hold' on any deposit account pledged as
Collateral to secure the Obligations, or on any other deposit item under the
normal terms of PBF's business practice. Borrower hereby authorizes PBF
to file and record such Financing Statements and other instruments as PBF may
deem necessary or desirable from time to time to perfect its security interest
in the Collateral.
- Delivery of Additional Documentation Required.
Borrower shall from time to time execute, deliver and endorse to PBF, at the
request of PBF, all Collateral, all Financing Statements, and all other
documents that PBF may reasonably request, in form satisfactory to PBF, to
perfect and continue perfected PBF's Liens in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan Documents,
including without limitation any documents or instruments which may be required
by the laws of the State of California.
- Right
to Inspect. PBF (through any of its officers, employees, or agents) shall
have the right upon reasonable prior notice, or upon no notice if an Event of
Default shall then be existing, from time to time, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
- Release of Claims.
- No Known Claims Against PBF. Borrower warrants and
represents to PBF that, to Borrower's knowledge, it has and has had no claims,
causes of action, demands, costs, losses or actions of any nature against PBF,
whether the same have been or might have been asserted as a claim, cross-claim,
counter-claim or cause of action in any tribunal.
- Release By Borrower. For and in consideration of
PBF's agreement set forth herein, Borrower hereby releases and forever
discharges PBF, its affiliates, officers, directors, employees, shareholders,
attorneys, agents and representatives, individually and collectively, of and
from any and all matters arising out of any business, legal, or lending
relationships that have existed prior to the date hereof between Borrower and
PBF and including any and all past, present or future claims, actions, causes of
action, obligations, costs or demands, known or unknown, whether or not any such
claim, action, cause of action, obligation, cost, lost or demand has been, or
might have been, asserted as a claim, cross-claim, counter-claim or cause of
action in any tribunal.
- No Prior Assignment of Released Claims. Each of
the parties warrants and represents that it has not assigned or transferred or
purported to assign or transfer to any other person or entity any claim or
matter released herein and that no other person has any interest therein of any
nature. In the event that releasing party shall have assigned or transferred, or
purported to assign or transfer, or any other person shall claim an interest in
any claim or other matter herein released, then the releasing party shall
indemnify the released party and hold it harmless from and against any and all
losses, costs, claims or expenses, including but not limited to all costs
related to the defense of any action, including reasonable attorneys' fees,
based upon or arising out of or incurred as a result of any such claim,
assignment or transfer.
- No Admission of Liability. Borrower understands
and acknowledges that if any claims or other matters herein released existed,
such would be disputed by PBF. No action taken by PBF, either previously or in
connection with this Agreement, shall be deemed or construed to be (a) an
admission to the truth or falsity of any claims made; or (b) an
acknowledgment or admission by PBF of any fault or liability whatsoever to any
other party or to any third party.
- Waiver of California Civil Code &sec: 1542. Each
of the parties hereby relinquishes and waives all rights conferred upon it by
the provisions of Section 1542 of the California Civil Code (or any like
provision of federal or state law), which reads as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his settlement
with the debtor.
Each of the parties hereby acknowledges that it or its
attorneys might hereafter discover facts different from or in addition to those
which it or its attorneys now know or believe to be true with respect to any of
the matters herein released, including that no such claims presently exist, and
agrees that this instrument shall remain in effect as a full and complete
release notwithstanding any such different or additional facts. Each of the
parties hereby covenants that this Agreement shall inure to the benefit of and
be binding upon its administrators, representatives, successors, trustees and
assigns.
- Representations And Warranties.
Borrower represents and warrants as follows:
- Due
Organization and Qualification. Borrower (i) is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware; (ii) is duly qualified to do business and is in good standing in every
jurisdiction where the nature of its business requires it to be so qualified
(except where the failure to so qualify would not have a Material Adverse Effect
on Borrower's condition, financial or otherwise, or on Borrower's ability to pay
or perform the Obligations); and (iii) has all requisite power and authority to
execute and deliver this Agreement and each Loan Document executed and delivered
by Borrower pursuant to this Agreement and to perform its obligations thereunder
and hereunder.
- Due
Authorization; No Conflict. The execution, delivery, and performance of the
Loan Documents (i) are within Borrower's powers and have been duly authorized by
all necessary action; (ii) do not conflict with nor constitute a breach of any
provision contained in Borrower's operating agreement or charter documents or a
material breach of any law or any contractual restriction binding on or
affecting Borrower or by which Borrower's property may be affected; (iii) do not
require any authorization or approval or any other action by, or any notice to,
or filing with, any governmental authority or any other Person under any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Borrower is a party or by which Borrower or any of its Property is bound
except such as have been obtained or made and except for filings required by the
Securities and Exchange Commission and The Nasdaq National Market; and (iv) do
not constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Except for those defaults
specifically identified in that certain Form 10-Q filed with the Securities and
Exchange Commission on behalf of Borrower for the quarterly period ended
September 28, 2003, under Commission File Number 0-15930 and Schedule 6.2
hereto, Borrower is not in default under any agreement to which it is a party or
by which it is bound, which default could reasonably be expected to have a
Material Adverse Effect.
- Name;
Location of Chief Executive Office. Borrower has not done business under any
name other than that specified on the signature page hereof. The chief executive
offices of Borrower are located at the addresses indicated in Section 11
hereof.
- Litigation. Except as set forth in the SEC Documents
and Schedule 6.4, there are no actions or proceedings pending by or
against Borrower, or any Subsidiary of Borrower, before any court or
administrative agency in which an adverse decision is reasonably likely to have
a Material Adverse Effect on Borrower, or upon PBF's security interest in the
Collateral. Borrower has no knowledge of any such actions or proceedings that
are pending or that have been threatened in writing.
- Financial Statements. All unconsolidated,
consolidating, and consolidated financial statements related to Borrower or any
Subsidiary that have been delivered by Borrower to PBF fairly present in all
material respects Borrower's unconsolidated financial condition as of the date
thereof and Borrower's unconsolidated results of operations for the period then
ended and the consolidated financial condition of Borrower. There has not been a
material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to
PBF.
- Solvency. Borrower's assets exceed its liabilities
such that it has a positive net worth.
- Regulatory Compliance. Borrower and each Subsidiary
of Borrower have met the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. No event has occurred resulting
from any failure to comply with ERISA that is reasonably likely to result in
Borrower's incurring any liability that could reasonably be expected to have a
Material Adverse Effect. Borrower is not an `investment company' or a company
`controlled' by an `investment company' within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of the
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G,
T, and U of the Board of Governors of the Federal Reserve System). Borrower has
materially complied with all the provisions of the Federal Fair Labor Standards
Act. Borrower has not violated any statutes, laws, ordinances, or rules
applicable to it, violation of which could reasonably be expected to have a
Material Adverse Effect.
- Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state, or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing or otherwise disposing of hazardous waste
or hazardous substances into the environment.
- Taxes. Borrower and each Subsidiary of Borrower has
filed or caused to be filed all tax returns required to be filed, and has paid,
or has made adequate provision for the payment of, all taxes reflected
therein.
- Subsidiaries. Borrower does not own any stock,
partnership interest, or other equity securities of any Person, except as set
forth on Schedule 6.10 and except for Permitted
Investments.
- Government Consents. Borrower and each Subsidiary of
Borrower have obtained all consents, approvals, and authorizations of, made all
declarations or filings with, and given all notices to, all governmental
authorities that are necessary for the continued operation of Borrower's
business as currently conducted except where the failure to obtain any such
consent, approval, or authorization, to make any such declaration or filing, or
to be given any such notice could not reasonably be expected to have a Material
Adverse Effect.
- Full
Disclosure. No representation, warranty, or other statement made by Borrower
in any certificate or written statement furnished to PBF contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained in such certificates or statements not
misleading (it being recognized by PBF that the projections and forecasts
provided by Borrower are not to be viewed as facts and that actual results
during the period or periods covered by any such projections and forecasts may
differ from the projected or forecasted results).
- Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral, free and clear of all Liens, except with
respect to the prior Liens in favor of PBF as described in Section 4.1
above and otherwise set forth on Schedule 8.6 hereto.
- Needham Agreement. There has been no modification
or amendment to the Needham Agreement, and that, except for the documents
expressly contemplated in the Needham Agreement, no other document or instrument
has been entered into between Borrower and Guarantor in connection with the
Needham Agreement
- Affirmative Covenants.
Borrower covenants and agrees that until payment in full of
all outstanding Obligations, and for so long as PBF may have any commitment to
make an Advance hereunder, Borrower shall do all of the following:
- Good
Standing. Borrower shall maintain or cause to be maintained its and each of
its Subsidiaries' legal existence and good standing in its jurisdiction of
formation, creation, or incorporation, and maintain qualification in each
jurisdiction in which the failure to so qualify is reasonably likely to have a
Material Adverse Effect. Borrower shall maintain and shall cause each of its
Subsidiaries to maintain, to the extent consistent with prudent management of
Borrower's business, in force all licenses, approvals and agreements, the loss
of which could reasonably be expected to have a Material Adverse Effect or a
Material Adverse Effect on the Collateral or the priority of PBF's Lien on the
Collateral.
- Government Compliance. Borrower shall meet, and
shall cause each Subsidiary to meet, the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA. Borrower shall
comply, and shall cause each Subsidiary to comply, with all statutes, laws,
ordinances, and government rules and regulations to which it is subject,
noncompliance with which is reasonably likely to have a Material Adverse
Effect.
- Financial Statements, Reports, Certificates. So long
as any Obligations under the Loan Documents are outstanding, Borrower shall
deliver to PBF, in addition to all those financial reports required under the
terms of Schedule 1, Section 5(V)(ii) of the Domestic Factoring Agreement and
under the terms of the Forbearance Agreement, the following:
- within five (5) days of filing, copies of all statements,
reports and notices sent or made available generally by Borrower to its members,
security holders or to any creditors of Borrower, and all reports filed with any
regulatory agency;
- promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened in writing against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more;
- such budgets, sales projections,
operating plans or other financial information as PBF may reasonably request
from time to time; and
- promptly after the occurrence of
an event which has resulted in a Material Adverse Effect, a report of such
event.
- Taxes. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to PBF, on demand, appropriate certificates attesting
to the payment or deposit thereof, and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish PBF with proof
satisfactory to PBF indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
- Insurance.
- Borrower shall keep all of its assets insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks and in such amounts as ordinarily insured against by other owners in
similar businesses conducted in the locations where Borrower's business is
conducted on the date hereof. Borrower shall also maintain insurance relating to
Borrower's ownership and use of its assets in amounts and of a type that are
customary to businesses similar to Borrower's.
- All such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to PBF. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to PBF, naming PBF as first loss payee
thereof and all liability insurance policies shall name PBF as an additional
insured, and shall specify that the insurer must give at least thirty (30) days'
notice to PBF before canceling its policy for any reason. Borrower shall deliver
to PBF certified copies of such policies of insurance and evidence of the
payments of all premiums therefor. All Proceeds payable under any such policies
shall, at the option of PBF, be payable to PBF to be applied to the
Obligations.
- Registration of Intellectual Property Rights.
Borrower shall register or cause to be registered with the United States Patent
and Trademark Office or the United States Copyright Office, as applicable, those
additional intellectual property rights developed or acquired by Borrower from
time to time in connection with any product prior to the sale or licensing of
such product to any third party.
- Further Assurances. At any time and from time to
time Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by PBF to effect the purposes of
this Agreement.
- Use of
Proceeds. Borrower shall use the Line of Credit for general working capital
purposes.
- Asset
Transfers to Subsidiaries. Except in the ordinary course of business,
Borrower shall not Transfer any of its cash or cash equivalents or of its assets
to Subsidiaries at any time prior to payment in full of all outstanding
Obligations of Borrower to PBF.
- Audits. Borrower shall provide Accounts Receivable
audits at the PBF's request, from time to time, but no less frequently than
semi-annually. The reasonable cost of each audit will be paid by Borrower within
10 days after demand.
- Depository Accounts. Borrower shall maintain
depository accounts with Cupertino National Bank or one of its Affiliates at all
times.
- Negative Covenants.
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until payment in full of all outstanding Obligations of Borrower
to PBF, Borrower will not do any of the following:
- Chief
Executive Office. During the continuance of this Agreement, change the chief executive
office or principal place of business or cause or permit the Collateral (other
than in the ordinary course of business), or the records concerning the
Collateral, to be located at any location other than the locations listed on the
Schedule without thirty (30) days prior written notice to PBF.
- Dispositions. Transfer, or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, other
than: (i) Transfers of Inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and exclusive licenses with geographic
or other limitations granted in the ordinary course of business and similar
arrangements for the use of the property of Borrower or its Subsidiaries; or
(iii) Transfers of worn-out or obsolete Equipment or Equipment financed by
other vendors; or (iv) Transfers which constitute liquidation of
Investments permitted under Section 8.9.
- Change
in Business. Engage in any business other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or suffer a material change in
Borrower's ownership, management, or directors. For purposes of this Section
8.3, a change in ownership of 15% or more of the ownership interest in
Borrower shall constitute a material change in Borrower's ownership; provided
that the ownership change contemplated in the Needham Agreement shall not
constitute a material change in ownership under this Section 8.3.
Borrower will not, without thirty (30) days' prior written notification to PBF,
relocate its chief executive office or change its name or do business under any
other name than is set forth on the signature page hereof.
- Mergers or Acquisitions. Merge or consolidate with
or into any other business organization, or acquire all or substantially all of
the capital stock or property of another Person (collectively, a `Merger'),
without the prior written consent of PBF, which may be withheld in PBF's sole
discretion.
- Indebtedness. Create, incur, or assume any
Indebtedness, except pursuant to this Agreement and under the Ex-Im Factoring
Agreement and the Domestic Factoring Agreement.
- Encumbrances. Create, incur, assume, or suffer to
exist any Liens against Borrower's total assets other than the liens set forth
on Schedule 8.6 hereto.
- Assignment of Income. Without PBF's prior written
approval, assign or otherwise convey any right to receive income, including the
sale of any Accounts, or permit any of its Subsidiaries so to
do.
- Distributions. Pay any cash dividends or make any
other distribution or payment on account of or in redemption, retirement, or
purchase of any capital stock in Borrower.
- Investments. Directly or indirectly acquire or own,
or make any Investment in or to any Person, or permit any of its Subsidiaries
(other than Southwall Europe GmbH) to do so, other than Permitted
Investments.
- Compliance. Become an `investment company' or a
company controlled by an `investment company,' within the meaning of the
Investment Company Act of 1940, or become principally engaged in, or undertake
as one of its important activities, the business of extending credit for the
purpose of purchasing or carrying margin stock, or use the Proceeds of any
Advance for such purpose. Fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur, fail to comply with the Federal Fair Labor Standards Act, or violate
any law or regulation, which violation could reasonably be expected to have a
Material Adverse Effect, or permit any of its Subsidiaries to do any of the
foregoing.
- Events
of Default.
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
- Payment Default. If Borrower fails to pay the
principal of, or any interest on, the Advance when due; or fails to pay when due
any portion of any other Obligations not constituting such principal or
interest, including without limitation PBF Expenses.
- Covenant Default.
- If Borrower fails to perform in a
material respect as and when required any obligation under Section 7 of
this Agreement or violates in a material respect any of the covenants contained
in Section 8 of this Agreement and such default is not cured within 10
days of the notice thereof; or
- If Borrower fails or neglects to perform, keep or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the other Loan Documents, or in any other present
or future agreement between Borrower and PBF and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within ten (10) days after Borrower receives notice
thereof or any Responsible Officer of Borrower becomes aware thereof;
provided however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot, after diligent attempts by Borrower,
be cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Advances
will be required to be made during such cure period).
- Material Adverse Effect. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of PBF's security
interests in the Collateral; or a material impairment of the value or priority
of PBF's security interests in the Collateral;
- Attachment. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ of distress
warrant or levy has not been removed, discharged or rescinded within thirty (30)
days, or if Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's assets by the
United States Government, or any department, agency, or instrumentality thereof,
or by any state, county, municipal, or governmental agency, and the same is not
paid within ten (10) days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by Borrower;
- Insolvency. If Borrower's liabilities exceed its
assets such that it has a negative net worth, or if any Insolvency Proceeding is
commenced by Borrower, or if any Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within sixty (60) days (provided that no
Advances will be made prior to the dismissal of such Insolvency
Proceeding);
- Other
Agreements. If (i) a default or breach occurs and continues beyond any
applicable grace or cure period under any other existing or future loan made to
Borrower by PBF or any Affiliate of PBF, including without limitation any
default or breach under the Domestic Factoring Agreement or under the Ex-Im
Factoring Agreement; (ii) a material default or breach occurs under the Needham
Agreement, or any related document or instrument, or (iii) a default or breach
occurs and continues beyond any applicable grace or cure period under any other
agreement, document, or instrument to which Borrower is a party with a third
party or parties resulting in a right by such third party or parties, to
accelerate the maturity of any Indebtedness in excess of $50,000, and such party
so accelerates;
- Letter of Credit. The Letter of Credit expires or
is terminated or dishonored for any reason (except if draws under the Letter of
Credit are dishonored because of acts or omissions of PBF or its Affiliates), or
if any notice of termination is given by the issuer of the Letter of Credit for
any reason;
- Judgments. If a final, nonappealable judgment or
judgments for the payment of money in an amount in excess of $50,000 not covered
by insurance shall be rendered against Borrower at any time before all
outstanding Obligations of Borrower to PBF have been paid in full;
- Misrepresentations. If any material
misrepresentation or material misstatement exists now or hereafter in any
warranty or representation set forth herein or in any other Loan Document or in
any certificate delivered to PBF by any Responsible Officer pursuant to this
Agreement or any other Loan Document or to induce PBF to enter into this
Agreement or any other Loan Document;
- Litigation. If Borrower or any of Borrower's
Affiliates brings litigation against PBF or any of PBF's Affiliates with respect
to this Agreement, any of the Loan Documents, or any of the transactions
contemplated hereby or thereby; or
- Guaranty. The Guaranty ceases for any reason to be
in full force or Guarantor does not perform any obligation under the Guaranty in
any material respect, or any material misrepresentation or material misstatement
exists now or later in any warranty or representation in the Guaranty or any
other document or instrument executed by Guarantor, or any circumstance
described in Sections 9.4, 9.5, or 9.6 occurs with respect
to Guarantor.
- PBF's
Rights And Remedies.
- Rights
and Remedies Regarding All Events of Default. Upon the occurrence and during
the continuance of an Event of Default, PBF may, at its election, without notice
of its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
- Declare all Obligations, whether
evidenced by this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable (provided that upon the occurrence of an Event of
Default described in Section 9.5 all Obligations shall become immediately
due and payable without any action by PBF);
- Commence legal action against
Borrower to collect all amounts due and outstanding pursuant to the terms of
this Agreement, provided however, that the commencement of such an action
is not necessary or a prerequisite to the exercise of any of PBF's other rights
or remedies hereunder;
- Cease advancing money or
extending credit to or for the benefit of Borrower under this Agreement or under
any other agreement between Borrower and PBF;
- Settle or adjust disputes and
claims directly with account debtors for amounts, upon terms, and in whatever
order that PBF reasonably considers advisable;
- Without notice to or demand upon
Borrower, make such payments and do such acts as PBF considers necessary or
reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if PBF so requires, and to make the Collateral
available to PBF as PBF may designate. Borrower authorizes PBF to enter the
premises where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in PBF's determination appears to be prior or
superior to its security interest and to pay all expenses incurred in connection
therewith. With respect to any of Borrower's owned premises, Borrower hereby
grants PBF a license to enter into possession of such premises and to occupy the
same, without charge, for up to ninety (90) days in order to exercise any of
PBF's rights or remedies provided herein, at law, in equity, or
otherwise;
- Without notice to Borrower, set
off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by PBF, or (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by PBF;
- Ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the
manner provided for herein) the Collateral. PBF is hereby granted a license or
other right, solely pursuant to the provisions of this Section 10.1, to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with PBF's exercise of its rights under this Section
10.1, Borrower's rights under all licenses and all franchise agreements
shall inure to PBF's benefit;
- Sell the Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as PBF determines is commercially reasonable and in
accordance with the Code;
- Credit bid and purchase at any
public sale of all or any portion of the Collateral, whether it be a foreclosure
sale, an execution sale, a sale pursuant to Section 363 of the Bankruptcy Code,
or otherwise;
- Upon not less than 30 days prior
written notice to Borrower, audit Borrower's Accounts at Borrower's expense;
and
- Exercise any other right or
remedy PBF may have under the Code or other law; and
- Any deficiency that exists after
disposition of the Collateral as provided above will be paid immediately by
Borrower.
- Power
of Attorney. Effective only upon the occurrence and during the continuance
of an Event of Default, Borrower hereby irrevocably appoints PBF (and any of
PBF's designated officers, or employees) as Borrower's true and lawful attorney
to: (a) send requests for verification of Accounts or notify account debtors of
PBF's security interest in the Accounts; (b) endorse Borrower's name on any
checks or other forms of payment or security that may come into PBF's
possession; (c) sign Borrower's name on any invoice or bill of lading relating
to any Account, drafts against account debtors, schedules and assignments of
Accounts, verifications of Accounts, and notices to account debtors; (d) make,
settle, and adjust all claims under and decisions with respect to Borrower's
policies of insurance; and (e) settle and adjust disputes and claims respecting
the Accounts directly with Account debtors, for amounts and upon terms which PBF
determines to be reasonable; provided PBF may exercise such power of attorney to
sign the name of Borrower on any of the documents described in Section
4.2 and otherwise to perfect and continue perfected PBF's Liens in the
Collateral regardless of whether an Event of Default has occurred. The
appointment of PBF as Borrower's attorney-in-fact, and each and every one of
PBF's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed.
- Accounts Collection. At any time from the date of
this Agreement, PBF may notify any Person owing funds to Borrower of PBF's
security interest in such funds and verify the amount of such Account. Borrower
shall collect all amounts owing to Borrower for PBF, receive in trust all
payments as PBF's trustee, and immediately deliver such payments to PBF in their
original form as received from the Account debtor, with proper endorsements for
deposit.
- PBF
Expenses. If Borrower fails to pay any amounts or furnish any required proof
of payment due to third persons or entities, as required under the terms of this
Agreement, then PBF may do any or all of the following: (a) make payment of
the same or any part thereof; or (b) set up such reserves as PBF deems
necessary to protect PBF from the exposure created by such failure; or
(c) obtain and maintain insurance policies of the type required under the
terms of this Agreement and take any action with respect to such policies as PBF
deems prudent. Any amounts so paid or deposited by PBF shall constitute PBF
Expenses, and shall be immediately due and payable, and shall bear interest at
the then applicable rate hereinabove provided. Any payments made by PBF shall
not constitute an agreement by PBF to make similar payments in the future or a
waiver by PBF of any Event of Default under this Agreement.
- PBF's
Liability for Collateral. So long as PBF complies with the same practices as
banks generally use in connection with collateral held by them, PBF shall not in
any manner or way be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral occurring or arising
in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person. All risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.
- Remedies Cumulative. PBF's rights and remedies under
this Agreement, the Guaranty, the Promissory Note, the other Loan Documents, and
all other agreements between Borrower and PBF shall be cumulative. PBF shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity. No exercise by PBF of one right or remedy shall
be deemed an election, and no waiver by PBF of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by PBF shall
constitute a waiver, election, or acquiescence by it. No waiver by PBF shall be
effective unless made in a written document signed by PBF and then shall be
effective only in the specific instance and for the specific purpose for which
it was given.
- Demand; Protest. Except as otherwise expressly
provided in this Agreement, the Guaranty, or the Promissory Note, Borrower
waives demand, protest, notice of protest, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by PBF on which
Borrower may in any way be liable.
- Notices.
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by facsimile to Borrower or to PBF, as the case may be, at its addresses set
forth below:
If to Borrower: |
Southwall Technologies Inc.
3975 East Bayshore Road
Palo Alto, CA 94303
Attn: Mike Seifert
Fax: (650) 967-8713
|
If to PBF: |
Pacific Business Funding
20195 Stevens Creek Blvd., Suite 220
Cupertino, CA 95014
Attn: Mike Hansen
Fax: (408) 255-9313
|
The parties hereto may change the address at which
they are to receive notices hereunder, by notice in writing in the foregoing
manner given to the other.
- Choice
of Law and Venue, Jury Trial Waiver.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and PBF hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND PBF EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
- General Provisions.
- Successors and Assigns. This Agreement shall bind
and inure to the benefit of the respective successors and permitted assigns of
each of the parties; provided, however, that neither this Agreement nor
any rights hereunder may be assigned by Borrower without PBF's prior written
consent, which consent may be granted or withheld in PBF's sole discretion. PBF
shall have the right without the consent of or notice to Borrower to sell,
transfer, negotiate, or grant participation in all or any part of, or any
interest in, PBF's obligations, rights, and benefits hereunder.
- Indemnification. Borrower shall defend, indemnify,
and hold harmless PBF and its officers, employees, and agents against:
(a) all obligations, demands, claims, and liabilities claimed or asserted
by any other party in connection with the loan transactions contemplated by this
Agreement; (b) all costs, expenses and reasonable attorneys fees that PBF
suffers, incurs or pays in connection with any legal proceedings, depositions,
discovery or legal process which (i) occurs after Closing and (ii) arises out of
acts or conduct of Borrower; and (c) all losses or PBF Expenses in any way
suffered, incurred, or paid by PBF as a result of or in any way arising out of,
following, or consequential to transactions between PBF and Borrower whether
under this Agreement or otherwise (including without limitation reasonable
attorneys' fees and expenses), except for losses caused by PBF's gross
negligence or willful misconduct.
- Time
of Essence. Time is of the essence for the performance of all obligations
set forth in this Agreement.
- Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any
provision.
- Amendments in Writing, Integration. This Agreement
cannot be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
- Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
- Survival. All covenants, representations, and
warranties made in this Agreement shall continue in full force and effect so
long as any Obligations of Borrower to PBF remain outstanding. The obligations
of Borrower to indemnify PBF with respect to the expenses, damages, losses,
costs, and liabilities described in Section 13.2 hereof shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against PBF have run.
- Confidentiality. In handling any confidential
information, PBF shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement, except that disclosure of such information may be
made (i) to the subsidiaries, agents, advisers, and affiliates of PBF in
connection with its present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the loan,
made hereunder, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulation, rule or order, subpoena,
judicial order, or similar order; and (iv) as may be required in connection
with the audit, or similar investigation of PBF. Confidential information
hereunder shall not include information that either (a) is in the public
domain or in the knowledge or possession of PBF when disclosed to PBF, or
becomes part of the public domain after disclosure to PBF through no fault of
PBF; or (b) is disclosed to PBF by a third party, provided PBF does not
have actual knowledge that such third party is prohibited from disclosing such
information.
- Exhibits. Exhibits A through F,
inclusive are incorporated herein by this reference.
- Effect
of Headings. The subject headings of the sections, subsections, paragraphs
and subparagraphs of this Agreement are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of its
provisions.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
|
SOUTHWALL TECHNOLOGIES INC.,
a Delaware corporation
By:
Name:
Title: |
|
PACIFIC BUSINESS FUNDING, a division
of CUPERTINO NATIONAL BANK
By:
Name:
Title: |
LIST OF EXHIBITS AND SCHEDULES
Exhibits
A. Schedule of Exceptions
B. List Identifying the Collateral
C Form of Promissory Note
D. Form of Compliance Certificate
E. Form of Disbursement Authorization
F. Form of Letter of Credit
Schedules
3.2/6.5
6.2. Compliance
6.4 Litigation
6.10. Subsidiaries
8.6. Liens
EXHIBIT A
SCHEDULE OF EXCEPTIONS
There are no exceptions.
Borrower has disclosed to PBF that, since November 18, 2003, one of
Borrower's suppliers, DTF (Dupont Teijin Films), has changed Borrower to a COD
status, which has negatively affected Borrower's cash flow between $500,000 and
$1,000,000.
EXHIBIT B
COLLATERAL
All of Borrower's right, title and interest in, to and under the following,
whether now owned by or owing to, or hereafter acquired by or arising in favor
of, Borrower, and regardless of where located:
- All accounts, accounts receivable, chattel paper, cash,
investment property, contract rights, documents, instruments, letters of credit,
certificates of deposit, banker's acceptances, drafts, securities and general
intangibles, including all claims, causes of action, deposit accounts
(including, without limitation, the Depository Accounts), rights to receive tax
refunds, rights in and claims under insurance policies (including rights to
unearned premiums), customer lists, copyrights, copyright applications,
copyright registrations, patents, patent applications, patent registrations,
trademarks, service marks, trade styles, trade names, trade secret rights
(including all rights to unpatented inventions, know-how, operating manuals,
license rights and agreements, and confidential information), mask work or
similar rights, license agreements, goodwill associated with trademarks and
trademark licenses, and other intellectual property of every kind, as well as
other rights to payment, leases, franchise agreements, blueprints, drawings,
purchase orders, route lists, computer discs, computer tapes, literature,
reports, catalogs, design rights, royalties, license rights, and rights to
payment of any kind, as well as credit insurance, guaranties, and other security
for any right to payment;
- All inventory, merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process, and finished
products;
- All Advances, funds, monies, remittances, and other
amounts advanced under this Agreement and any other agreement between Borrower
and Bank;
- All goods, equipment, machinery, vehicles, motor
vehicles, furniture, fixtures, tools and supplies;
- All investment securities;
- All farm products, crops, timber, minerals and like
(including oil and gas);
- All books and records relating to the foregoing,
including all computer programs, printed output and computer readable data;
- All attachments, accessories, accessions to, additions
to, improvements to, and substitutions and replacements for, all of the
foregoing; and
- All Proceeds and products of the foregoing, whether due
to voluntary or involuntary disposition, including insurance Proceeds. Borrower
agrees to deliver to Bank the originals of all instruments, chattel paper, and
documents evidencing or related to Accounts and other Collateral.
EXHIBIT C
PROMISSORY NOTE
$3,000,000.00 _____________, California
December 18, 2003
FOR VALUE RECEIVED, the undersigned, Southwall Technologies
Inc., a Delaware corporation (`Borrower'), promises to pay to the order of
Pacific Business Funding, a division of Cupertino National Bank (the `PBF'), at
such place as the holder hereof may designate, in lawful money of the United
States of America, the principal sum of Three Million Dollars ($3,000,000), or
so much thereof as may be advanced from time to time, pursuant to the terms of
the Line of Credit made by PBF to Borrower under that certain Loan and Security
Agreement between Borrower and PBF of even date herewith, as amended from time
to time (the `Loan Agreement'). Borrower shall also pay interest on the unpaid
advances under the Line of Credit at the rate and in accordance with the terms
of the Loan Agreement. The entire principal amount and all accrued but unpaid
interest thereon shall be due and payable on the Maturity Date. Terms with
initial capital letters and not otherwise defined herein shall have the meanings
designated for such terms in the Loan Agreement.
PBF is hereby authorized by Borrower to endorse on PBF's
books and records the principal amount advanced pursuant to the Line of Credit
under this Promissory Note (the `Note') and the amount of each payment or
prepayment of principal received by PBF; it being understood, however, that
failure to make any such endorsement (or any errors in notation) shall not
affect the obligations of Borrower with respect to amounts due hereunder, and
payments of principal by Borrower shall be credited to Borrower notwithstanding
the failure to make a notation (or any errors in notation) thereof on such books
and records.
Borrower promises to pay PBF all costs and expenses of
collection of this Note and to pay all reasonable attorneys' fees incurred in
such collection or in any suit or action to collect this Note or in any appeal
thereof, except where a judgment is rendered against PBF in any such suit or
action. Borrower waives presentment, demand, protest, notice of protest, notice
of dishonor, notice of nonpayment, and any and an other notices and demands in
connection with the delivery, acceptance, performance, default or enforcement of
this Note, as well as any applicable statute of limitations. No delay by PBF in
exercising any power or right hereunder shall operate as a waiver of any power
or right. Time is of the essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which is
hereby incorporated by reference, and shall govern the rights and obligations of
Borrower with respect to all obligations hereunder.
This Note is secured by a security interest in certain
collateral, which security interest was granted by Borrower to PBF pursuant to
the terms and conditions of the Loan Agreement and other documents or
instruments referenced therein.
BORROWER AND PBF HEREBY WAIVE THEIR RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. This Note shall be deemed to be made under, and shall be
construed in accordance with and governed by the laws of the State of
California, excluding conflicts of laws principles.
|
SOUTHWALL TECHNOLOGIES INC.,
a Delaware corporation
By:
Name:
Title: |
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: PACIFIC BUSINESS FUNDING
FROM: SOUTHWALL TECHNOLOGIES INC.
The undersigned duly-authorized officer or member
(hereinafter, `Officer') of Southwall Technologies Inc., a Delaware corporation
(`Borrower') hereby certifies that, in accordance with the terms and conditions
of the Loan and Security Agreement (the `Loan Agreement'), dated as of December
18, 2003, between Borrower and Pacific Business Funding, a Division of Cupertino
National Bank (`PBF'):
(i) Borrower is in compliance in all material
respects for the period ending _________________ with all required covenants of
the Loan Agreement, and the Promissory Note, except as expressly noted below;
and
(ii) all representations and warranties of Borrower
stated in the Loan Agreement are true and correct in all material respects as of
the date hereof.
Attached herewith are the required documents supporting the
above certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (`GAAP') and are
consistently applied from one period to the next except as explained in an
accompanying letter of footnotes.
Please indicate compliance status by circling Yes/No under
`Complies' column.
Reporting Covenants |
Required |
Complies |
All financial reports required under Domestic Factoring Agreement and under
the Forbearance Agreement |
Various |
Yes No |
Annual audited financial statements of Guarantor |
Within 120 days of fiscal year end |
Yes No |
Comments regarding Exceptions: See Attached.
Sincerely,
SIGNATURE
TITLE
DATE
EXHIBIT E
DISBURSEMENT AUTHORIZATION
TO: PACIFIC BUSINESS FUNDING
FROM: SOUTHWALL TECHNOLOGIES INC. and
NEEDHAM & COMPANY, INC.
The undersigned duly-authorized responsible officers
of Southwall Technologies Inc., a Delaware corporation (`Borrower') and Needham
& Company, Inc., a Delaware corporation (`Guarantor') each hereby authorize
and instruct Pacific Business Funding, a Division of Cupertino National Bank
(`PBF'), in accordance with the terms and conditions of the Loan and Security
Agreement (the `Loan Agreement'), dated as of December 18, 2003, between
Borrower and PBF, to disburse the sum of $________________ to Borrower.
Sincerely, Sincerely,
SIGNATURE SIGNATURE
TITLE TITLE
DATE DATE
EXHIBIT F
LETTER OF CREDIT
[TO BE ADDED]
DISCLOSURE SCHEDULE 3.2/6.5
Since November 18, 2003 one of Southwall's
suppliers, DTF (Dupont Teijin Films) has put them on COD. This action
has negatively impacted their cash flow between $.5M and $1.0M.
DISCLOSURE SCHEDULE 6.2
COMPLIANCE
1. Southwall is in default under the Domestic Factoring Agreement and
Export-Import Bank Factoring Agreement with Pacific Business Funding each dated
as of May 16, 2003.
2. Southwall is in default under the Credit Agreement and Promissory Note,
each dated May 6, 1997, with Sanwa Bank, Limited. Southwall is also in
default under the Guarantee Agreement Regarding 10 million US$ Credit
Facility and Reimbursement and Security Agreement, each dated
May 6, 1997, with Teijin Limited.
3. Southwall is in default under the Master Lease Agreement dated
July 19, 1999 with Matrix Funding Corporation.
4. All of Southwall's German loans and credit facilities contain provisions
to the effect that a material adverse change to Southwall or the like will be an
event of default; the other parties to some or all of those loans or agreements
may deem those provisions to be triggered by the Company's recent financial
performance and results and/or the transactions contemplated hereby or the
efforts hereof.
5. Southwall's credit facilities with Teijin/Sanwa contain provisions to the
effect that a material adverse change to Southwall or the like will be an event
of default; the other parties to some or all of those loans or agreements may
deem those provisions to be triggered by the Company's recent financial
performance and results and/or the transactions contemplated hereby or the
efforts hereof.
DISCLOSURE SCHEDULE 6.4
LITIGATION
1. `Hurricane Glass Shield, Inc. v. Southwall
Technologies Inc.' filed in the Superior Court of the State of California in
Santa Clara, California
2. `WASCO Products, Inc. v. Southwall Technologies Inc. and
Bostik, Inc.', Civ. Action No. C 02-2926 CRB, which was filed in
Federal District Court for the Northern District of California.
3. `Portfolio Financial Servicing Company v. Southwall
Technologies Inc.,' filed in state court in Utah.
4. `Four Seasons Solar Products Corp. vs. Black & Decker Corp.,
Bostik, Inc. and Southwall Technologies Inc.,' No. 5 CV1695,
pending in the United States District Court for the Eastern District of New
York.
The insurance carriers in some of Southwall's litigation related to alleged
product failures and defects in window products manufactured by others reserved
their rights to recover a portion or all of defense and settlement costs related
to the above-described and other litigation.
DISCLOSURE SCHEDULE 6.10
SUBSIDIARIES
Southwall Europe GmbH.
Southwall Worldwide Glass, Inc.
Southwall Sunflex, Inc.
DISCLOSURE SCHEDULE 8.6
LIENS
Secured Party |
Jurisdiction |
File Type |
File Number |
File Date |
Pacific Business Funding |
Delaware Secretary of State |
UCC-1 |
10820626 |
7/30/2001 |
VAResources, Inc. |
Delaware Secretary of State |
UCC-1 |
11497945 |
10/25/2001 |
IBM Credit Corporation |
Delaware Secretary of State |
UCC-1 |
20360838 |
1/18/2002 |
Teijin Limited |
Delaware Secretary of State |
UCC-1 |
20796346 |
3/28/2002 |
IBM Credit Corporation |
Delaware Secretary of State |
UCC-1 |
21202799 |
4/25/2002 |
IBM Credit Corporation |
Delaware Secretary of State |
UCC-1 |
21338718 |
5/8/2002 |
IBM Credit Corporation |
Delaware Secretary of State |
UCC-1 |
21997927 |
7/26/2002 |
IBM Credit Corporation |
Delaware Secretary of State |
UCC-1 |
22225310 |
8/28/2002 |
Academy Corporation |
Delaware Secretary of State |
UCC-1 |
30637796 |
3/14/2003 |
Tokai Financial Services |
California Secretary of State |
UCC-1 |
9908160372 |
3/11/1999 |
Crown Credit Company |
California Secretary of State |
UCC-1 |
9909860692 |
3/31/1999 |
Matrix Funding Corporation |
California Secretary of State |
UCC-1 |
9922160432 |
7/28/1999 |
Matrix Funding Corporation |
California Secretary of State |
UCC-1 |
9922260697 |
8/29/1999 |
Handy & Harman |
California Secretary of State |
UCC-1 |
9925860467 |
9/10/1999 |
Matrix Funding Corporation |
California Secretary of State |
UCC-1 |
9930661180 |
10/25/1999 |
Matrix Funding Corporation |
California Secretary of State |
UCC-1 |
9930661182 |
10/25/1999 |
Matrix Funding Corporation |
California Secretary of State |
UCC-1 |
0007560767 |
3/13/2000 |
Academy Precision Materials |
California Secretary of State |
UCC-1 |
0116960718 |
6/11/2001 |
US Bancorp |
California Secretary of State |
UCC-1 |
0228360154 |
10/8/2002 |
Pacific Business Funding |
Arizona Secretary of State |
UCC-1 |
1072185-0 |
6/14/1999 |
Pacific Business Funding |
Arizona Secretary of State |
UCC-1 |
1075193-0 |
7/6/1999 |
Matrix Funding Corporation |
Arizona Secretary of State |
UCC-1 |
1077342-0 |
7/23/1999 |
Matrix Funding Corporation |
Arizona Secretary of State |
UCC-1 |
1090220-0 |
10/26/1999 |
Matrix Funding Corporation |
Arizona Secretary of State |
UCC-1 |
1090221-0 |
10/26/1999 |
Matrix Funding Corporation |
Arizona Secretary of State |
UCC-1 |
1107904-0 |
3/13/2000 |
Cupertino National Bank |
Arizona Secretary of State |
UCC-1 |
1122803-0 |
6/22/2000 |
Handling Systems, Inc. (Assignee of Secured Party is Raymond
Leasing Corporation) |
Arizona Secretary of State |
UCC-1 |
1137900-0 |
9/13/2000 |
Academy Precision Materials/Academy Corporation |
Arizona Secretary of State |
UCC-1 |
1174895-0 |
6/7/2001 |
Deutsche Bank, IKB Deutsche Industriebank,
European Investment Bank and the Saxony Government have liens on Production
Machine 8, Production Machine 9, Production Machine 10 and related assets in
Germany.
1. Definitions and
Construction 1
1.1 Definitions 1
1.2 Accounting Terms 6
2. Loan and Terms of Payment. 6
2.1 Advances 6
2.2 Interest Rates, Payments, and Calculations 7
2.3 PBF Expenses 8
2.4 Additional Costs 9
2.5 Reimbursement of Costs Upon Failure of Closing 9
2.6 Term 10
3. Conditions of Loan. 10
3.1 Conditions Precedent to Loan 10
3.2 Additional Conditions to Closing 11
4. Creation of Security Interest 11
4.1 Grant of Security Interest 11
4.2 Delivery of Additional Documentation Required 11
4.3 Right to Inspect 12
5. Release of Claims 12
5.1 No Known Claims Against PBF 12
5.2 Release by Borrower 12
5.3 No Prior Assignment of Released Claims 12
5.4 No Admission of Liability 12
5.5 Waiver of California Civil Code &sec: 1542 13
6. Representations And Warranties 13
6.1 Due Organization and Qualification 13
6.2 Due Authorization; No Conflict 13
6.3 Name; Location of Chief Executive Office 14
6.4 Litigation 14
6.5 Financial Statements 14
6.6 Solvency 14
6.7 Regulatory Compliance 14
6.8 Environmental Condition 14
6.9 Taxes 15
6.10 Subsidiaries 15
6.11 Government Consents 15
6.12 Full Disclosure 15
6.13 Prior Encumbrances 15
6.14 Needham Agreement 15
7. Affirmative Covenants 15
7.1 Good Standing 16
7.2 Government Compliance 16
7.3 Financial Statements, Reports, Certificates 16
7.4 Taxes 16
7.5 Insurance 17
7.6 Registration of Intellectual Property Rights 17
7.7 Further Assurances 17
7.8 Use of Proceeds 17
7.9 Asset Transfers to Subsidiaries 17
7.10 Audits 18
7.11 Depository Accounts 18
8. Negative Covenants 18
8.1 Chief Executive Office 18
8.2 Dispositions 18
8.3 Change in Business 18
8.4 Mergers or Acquisitions 18
8.5 Indebtedness 18
8.6 Encumbrances 19
8.7 Assignment of Income 19
8.8 Distributions 19
8.9 Investments 19
8.10 Compliance 19
9. Events of Default 19
9.1 Payment Default 19
9.2 Covenant Default 19
9.3 Material Adverse Effect 20
9.4 Attachment 20
9.5 Insolvency 20
9.6 Other Agreements 20
9.7 Letter of Credit 21
9.8 Judgments 21
9.9 Misrepresentations 21
9.10 Litigation 21
9.11 Guaranty 21
10. PBF's Rights And Remedies 21
10.1 Rights and Remedies Regarding All Events of Default 21
10.2 Power of Attorney 23
10.3 Accounts Collection 23
10.4 PBF Expenses 23
10.5 PBF's Liability for Collateral 23
10.6 Remedies Cumulative 24
10.7 Demand; Protest 24
11. Notices 24
12. Choice of Law and Venue, Jury Trial Waiver 25
13. General Provisions 25
13.1 Successors and Assigns 25
13.2 Indemnification 25
13.3 Time of Essence 25
13.4 Severability of Provisions 26
13.5 Amendments in Writing, Integration 26
13.6 Counterparts 26
13.7 Survival 26
13.8 Confidentiality 26
13.9 Exhibits 27
13.10 Effect of Headings 27
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