-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AIVI3u+TsaN5wRRJjzo9bSzZNJuIapkOM2lDu2fKZJLil8QxNSX68xLHpukIBbLf REVhV7iVYMip1z/UE3A7YA== 0001047469-98-006314.txt : 19980218 0001047469-98-006314.hdr.sgml : 19980218 ACCESSION NUMBER: 0001047469-98-006314 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980212 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980217 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENUS INC CENTRAL INDEX KEY: 0000837913 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 942790804 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-17139 FILM NUMBER: 98540674 BUSINESS ADDRESS: STREET 1: 1139 KARLSTAD DR CITY: SUNNYVALE STATE: CA ZIP: 94089-2117 BUSINESS PHONE: 4087477120 MAIL ADDRESS: STREET 2: 1139 KARLSTAD DR CITY: SUNNYVALE STATE: CA ZIP: 94089-2117 8-K 1 FORM 8-K - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) February 12, 1998 GENUS, INC. ----------- (Exact name of registrant as specified in its charter) CALIFORNIA ---------- (State or other jurisdiction of incorporation or organization) 0-17139 94-2790804 ------- ---------- Commission File Number (I.R.S. Employer Identification Number) 1139 Karlstad Drive Sunnyvale, CA 94089 ------------------- (Address of principal executive offices) (408) 747-7120 -------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- ITEM 5. OTHER EVENTS On February 12, 1998, the Registrant closed a private placement of up to $10,000,000 of convertible preferred stock to certain institutional investors (the "Investors") pursuant to Regulation D promulgated under the Securities Act of 1933, as amended. The Investors invested $5,000,000 at the closing and will invest another $5,000,000 in the future if certain conditions are met. The material agreements between the Registrant and the Investors and a copy of the Registrant's press release announcing the closing of the preferred stock financing have been filed as exhibits to this Current Report on Form 8-K. -2- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized. GENUS, INC. Date: February 17, 1998 /s/ MARY F. BOBEL ------------------------ Mary F. Bobel Executive Vice President and Chief Financial Officer -3- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS (in accordance with Item 601 of Regulation S-K) 4.2 Convertible Preferred Stock Purchase Agreement, dated February 2, 1998, among the Registrant and the Investors. 4.3 Registration Rights Agreement, dated February 2, 1998, among the Registrant and the Investors. 4.4 Certificate of Determination. 99.1 Press Release dated February 12, 1998
-4- INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT NAME - ------------------------------------------------------------------------------- 4.2 Convertible Preferred Stock Purchase Agreement, dated February 2, 1998, among the Registrant and the Investors. 4.3 Registration Rights Agreement, dated February 2, 1998, among the Registrant and the Investors. 4.4 Certificate of Determination. 99.1 Press Release dated February 12, 1998.
-5- EX-4.2 2 EXHIBIT 4.2 EXHIBIT 4.2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT Between GENUS, INC., SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD., WESTOVER INVESTMENTS L.P., MONTROSE INVESTMENTS, LTD, BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. and BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. Dated as of February 2, 1998 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February 2, 1998, between Genus, Inc., a California corporation (the "COMPANY"), and Southbrook International Investments, Ltd., a corporation organized and existing under the laws of the British Virgin Islands ("SOUTHBROOK"), Westover Investments L.P., a Delaware limited partnership ("WESTOVER"), Montrose Investments, Ltd, a Cayman Islands exempt limited partnership ("MONTROSE"), Brown Simpson Strategic Growth Fund, L.P., a New York limited partnership ("BROWN SIMPSON LP") and Brown Simpson Strategic Growth Fund, Ltd., a Cayman Islands exempt company ("BROWN SIMPSON LIMITED"). Southbrook, Westover, Montrose, Brown Simpson LP and Brown Simpson Limited are each referred to herein as a "PURCHASER" and are collectively referred to herein as the "PURCHASERS." WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to acquire from the Company, shares of the Company's 6% Series A Convertible Preferred Stock, no par value (the "SERIES A PREFERRED"), and the Company's 6% Series B Convertible Preferred Stock, no par value (the "SERIES B PREFERRED" and together with the Series A Preferred, the "PREFERRED STOCK"). IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and each Purchaser agree as follows: ARTICLE I PURCHASE AND SALE OF PREFERRED SHARES 1.1 PURCHASE AND SALE. (a) Subject to the terms and conditions set forth herein, the Company shall issue and sell to the Purchasers, and the Purchasers, severally and not jointly, shall purchase from the Company: (i) 100,000 shares of Series A Preferred (the "SERIES A SHARES"); and (ii) up to 100,000 shares of Series B Preferred (the "SERIES B SHARES"); and together with the Series A Shares, the "SHARES"). (b) The Series A Preferred shall have the respective rights, preferences and privileges set forth in EXHIBIT A attached hereto (the "SERIES A TERMS"), which shall be incorporated into a certificate of determination to be approved by the Purchasers and filed on or prior to the Series A Closing (as defined below) by the Company with the Secretary of State of California (the "SERIES A DETERMINATION"). The Series B Preferred shall have respective rights, preferences and privileges identical to the Series A Terms, mutatis mutandis, and shall rank pari passu with the Series A Preferred with regard to dividends, liquidation, voting rights and any other preferential rights designated therein, except that (i) the Conversion Price (as defined below) for conversion of the Series B Shares shall be determined as of the Original Issue Date (as defined below) for such Series B Shares and (ii) the Initial Conversion Price for the Series B Shares shall be equal to 110% of the average Per Share Market Value for the 30 Trading Days immediately preceding the Original Issue Date for the Series B Shares. The Series B Preferred shall be authorized pursuant to a certificate of determination prepared by the Company, subject to the approval of the Purchasers, and filed at or prior to the Series B Closing Date (as defined below), by the Company with the Secretary of State of California (such certificate of determination, together with the Series A Determination, are referred to as the "CERTIFICATES OF DETERMINATION"). For purposes of this Agreement, "CONVERSION PRICE," "ORIGINAL ISSUE DATE," "CONVERSION DATE," "TRADING DAY" and "PER SHARE MARKET VALUE" shall have the meanings set forth in EXHIBIT A; and "MARKET PRICE" as at any date shall mean the average Per Share Market Value for the five (5) Trading Days immediately preceding such date. 1.2 PURCHASE PRICE. The purchase price per Share shall be $50.00. 1.3 THE CLOSINGS. (a) THE SERIES A CLOSING. (i) The closing of the purchase and sale of the Series A Shares (the "SERIES A CLOSING") shall take place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP ("ROBINSON SILVERMAN"), 1290 Avenue of the Americas, New York, New York 10104, immediately following the execution hereof or such later date as the parties shall agree, but not prior to the date that the conditions set forth in Section 4.1 have been satisfied or waived by the appropriate party nor later than February 10, 1998, provided, however, that if all conditions for such closing (except those conditions which must be satisfied at such closing) other than the filing of the Series A Determination have been satisfied by February 10, 1998, the date for such closing may be extended to a date no later than February 13, 1998. The date of the Series A Closing is hereinafter referred to as the "SERIES A CLOSING DATE." At the Series A Closing, the Company shall sell and issue to the Purchasers, and the Purchasers shall, severally and not jointly, purchase from the Company, 100,000 Series A Shares for an aggregate purchase price of $5,000,000 (the "SERIES A PURCHASE PRICE"). (ii) At the Series A Closing, (a) the Company shall deliver to the Purchasers (i) one or more stock certificates representing the Series A Shares purchased by such Purchaser as set forth next to such Purchaser's name on SCHEDULE 1 attached hereto, each registered in the name of such Purchaser, (ii) Warrants in the form of EXHIBIT B (the "SERIES A WARRANTS") to purchase an aggregate of 300,000 shares of the Company's common stock, no par value (the "COMMON STOCK") at an exercise price equal to 125% of the closing bid price of the Common Stock on the day prior to the Series A Closing Date, exercisable for three years from the Original Issue Date, each registered in the name of such Purchaser and in the amounts set forth in SCHEDULE 1 and (iii) all other documents, instruments and writings required to have been delivered at or prior to the Series A Closing by the Company pursuant to this Agreement and the Registration Rights Agreement, dated the date hereof, by and between the Company and the Purchasers, in the form of EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENT"), and (b) each Purchaser shall deliver to the Company the portion of the Series A Purchase Price set forth next to its name on SCHEDULE 1, in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for -2- such purpose prior to the Series A Closing Date, and all documents, instruments and writings required to have been delivered at or prior to the Series A Closing by such Purchaser pursuant to this Agreement and the Registration Rights Agreement. (b) THE SERIES B CLOSING. (i) Subject to the terms and conditions set forth in this Agreement, either party shall, if the average Per Share Market Value for the thirty Trading Days prior to the date of the Series B Subsequent Financing Notice is greater than $4.00, have the right to deliver a written notice to the other party (a "SERIES B SUBSEQUENT FINANCING NOTICE") requiring such other party to either sell or buy, as the case may be, the Series B Shares for an aggregate purchase price of $5,000,000 (the "SERIES B PURCHASE PRICE"). Either party may deliver a Series B Subsequent Financing Notice to the other party no earlier than 90 days after the effective date of the Underlying Shares Registration Statement (as defined in the Registration Rights Agreement) relating to the securities issued at the Series A Closing Date and no later than July 27, 1999. At the Series B Closing each Purchaser shall be obligated (subject to the terms and conditions herein) to purchase such portion of such Series B Shares as equals such Purchaser's pro rata portion of the Series A Purchase Price. The closing of the purchase and sale of the Series B Shares (the "SERIES B CLOSING") shall take place at the offices of Robinson Silverman on such date indicated in the Series B Subsequent Financing Notice (which may not be prior to the 15th Trading Day or subsequent to the 30th Trading Day after receipt by either party of the Subsequent Financing Notice, or as otherwise agreed to by the parties); PROVIDED that in no case shall the Series B Closing take place unless and until the conditions listed in Section 4.2 have been satisfied or waived by the appropriate party. The date of the Series B Closing is hereinafter referred to as the "SERIES B CLOSING DATE." (ii) At the Series B Closing, (a) the Company shall deliver to each Purchaser (i) a pro rata portion of the Series B Shares (determined by reference to the amount of Series A Shares issued and sold at the Series A Closing) to be issued and sold thereat (or such other amount upon which the parties may agree), registered in the name of the appropriate Purchaser, (ii) a pro rata portion of Warrants (determined by reference to the amount of Series A Warrants issued and sold at the Series A Closing) in the form of EXHIBIT B (the "SERIES B WARRANTS", and together with the Series A Warrants, the "WARRANTS") to purchase an aggregate of 300,000 shares of Common Stock at an exercise price equal to 125% of the closing bid price of the Common Stock on the day prior to the Series B Closing Date, exercisable for three years from the Original Issue Date, each registered in the name of such Purchaser and (iii) the legal opinion referenced in Section 4.2(b)(xii), substantially in the form attached hereto as EXHIBIT D, and (3) all other documents, instruments and writings required to have been delivered at or prior to the Series B Closing by the Company to the Purchasers pursuant to this Agreement; and (b) each Purchaser shall deliver to the Company (i) its pro-rata portion of the Series B Purchase Price in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose on or prior to the Series B Closing Date and (ii) all documents, instruments and writings required to have been delivered at or prior to the Series B Closing by such Purchaser pursuant to this Agreement. -3- ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company hereby makes the following representations and warranties to the Purchasers: (a) ORGANIZATION AND QUALIFICATION. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of California, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth in SCHEDULE 2.1(a) to the disclosure letter dated the date hereof, delivered by the Company to the Purchasers and made a part hereof (the "DISCLOSURE LETTER") (collectively the "SUBSIDIARIES"). Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of the Preferred Stock or any of the Transaction Documents (as defined below) in any material respect, (y) have or result in a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and the Subsidiaries, taken as a whole or (z) adversely impair the Company's ability to perform fully on a timely basis its obligations under any Transaction Document (any of (x), (y) or (z), being a "MATERIAL ADVERSE EFFECT"). (b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and the other Transaction Documents, and otherwise to carry out its obligations hereunder and thereunder. This Agreement, the Certificates of Determination, the Warrants and the Registration Rights Agreement are collectively referred to as the "TRANSACTION DOCUMENTS." The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company. Each of the Transaction Documents has been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate of incorporation, articles, by-laws or other charter documents. Prior to each of the closing dates the respective Certificate of Determination will have been filed with -4- the Secretary of State of the State of California and will be in full force and effect, enforceable against the Company in accordance with the terms thereof. (c) CAPITALIZATION. The authorized, issued and outstanding capital stock of the Company is set forth in SCHEDULE 2.1(c) to the Disclosure Letter. No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of any of the Transaction Documents. Except as disclosed in SCHEDULE 2.1(c) to the Disclosure Letter, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or, except as a result of the purchase and sale of the Shares and Warrants, securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. To the knowledge of the Company, except as specifically disclosed in the SEC Documents (as defined below) or SCHEDULE 2.1(c) to the Disclosure Letter, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") or has the right to acquire by agreement with or by obligation binding upon the Company beneficial ownership of in excess of 5% of the Common Stock, other than as contemplated hereby. A "PERSON" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. (d) ISSUANCE OF SHARES AND WARRANTS. The Shares and Warrants are duly authorized and, when issued and paid for in accordance with the terms hereof, shall be validly issued, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of first refusal of any kind (collectively, "LIENS"). The Company, at the Series A Closing Date and the Series B Closing Date (each a "CLOSING DATE"), as the case may be, will have and at all times while the Shares and any Warrants are outstanding will maintain an adequate reserve of duly authorized shares of Common Stock to enable it to perform its obligations under this Agreement, the Warrants and the Certificates of Determination with respect to the number of Shares and Warrants issued and outstanding at such Closing Date and in no circumstances shall such reserved and available shares of Common Stock be less than the sum of (i) 200% of the maximum number of shares of Common Stock which would be issuable upon conversion of the Shares were such conversion effected on the Original Issue Date for such Shares (ii) the number of shares of Common Stock issuable upon exercise of the Warrants and (iii) the number of shares Common Stock which would be issuable upon payment of dividends on the Shares, assuming each Share is outstanding for two years. The shares of Common Stock issuable upon conversion of the Shares or exercise of the Warrants and which may be issued as payment of dividends on the Shares are collectively referred to herein as the "UNDERLYING SHARES." When issued in accordance with the Certificates of Determination, and upon exercise of the Warrants and payment of the exercise price thereof, if any, the Underlying Shares will be duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens. -5- (e) NO CONFLICTS. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of its certificate of incorporation, bylaws or other charter documents (each as amended through the date hereof) or (ii) subject to obtaining the consents referred to in Section 2.1(f), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument (evidencing a Company debt or otherwise) to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including Federal and state securities laws and regulations), or by which any material property or asset of the Company is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental authority, except for violations which, individually or in the aggregate, would not have a Material Adverse Effect. (f) CONSENTS AND APPROVALS. Except as specifically set forth in SCHEDULE 2.1(f) to the Disclosure Letter, neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Federal, state, local or other governmental authority or other person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filings of the Certificates of Determination with respect to the Preferred Stock with the Secretary of State of California, which filings with respect to each of the Series A Shares and the Series B Shares shall be effected prior to the Series A Closing Date and the Series B Closing Date, as appropriate, (ii) the filing of Underlying Shares Registration Statements with the Securities and Exchange Commission (the "COMMISSION"), which shall be filed in accordance with and in the time periods set forth in the Registration Rights Agreement, (iii) the application(s) or any letter(s) acceptable to the Nasdaq Stock Market for the listing of the Underlying Shares with the Nasdaq Stock Market (and with any other national securities exchange or market on which the Common Stock is then listed), and (iv) any filings, notices or registrations under applicable state securities laws, unless, in all such cases, the failure to obtain such consent, waiver, authorization or order, or to give such notice or make such filing or registration would not have or result in, individually or in the aggregate, a Material Adverse Effect (together with the consents, waivers, authorizations, orders, notices and filings referred to in SCHEDULE 2.1(f) to the Disclosure Letter, the "REQUIRED APPROVALS"). (g) LITIGATION; PROCEEDINGS. Except as specifically disclosed in the Disclosure Materials (as hereinafter defined) there is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (Federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any of the -6- Transaction Documents or the Preferred Stock or (ii) could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. (h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, (ii) is in violation of any order of any court, arbitrator or governmental body applicable to it, or (iii) is in violation of any statute, rule or regulation of any governmental authority to which it is subject, except as could not reasonably be expected to, in any such case (individually or in the aggregate), have or result in a Material Adverse Effect. (i) SCHEDULES. The Schedules to this Agreement and the Schedules to the Disclosure Letter, together with the other Disclosure Materials, furnished by or on behalf of the Company do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (j) PRIVATE OFFERING. Neither the Company nor any Person acting on its behalf has taken or will take any action which might subject the offering, issuance or sale of the Securities to the registration requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"). (k) SEC DOCUMENTS; FINANCIAL STATEMENTS; NO ADVERSE CHANGE. The Company has filed all reports required to be filed by it under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), including pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials being collectively referred to herein as the "SEC DOCUMENTS" and, together with the Schedules to this Agreement and the Schedules to the Disclosure Letter, the "DISCLOSURE MATERIALS") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements to which the Company is a party or to which the property or assets of the Company are subject have been filed as exhibits to the SEC Documents as required; neither the Company nor any of its Subsidiaries is in breach of any agreement where such breach would have or result in a Material Adverse Effect. The financial statements of the Company included in the SEC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects -7- the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments. Since the date of the financial statements included in the Company's last filed Quarterly Report on Form 10-Q for the period ended September 30, 1997, there has been no event, occurrence or development that has had a Material Adverse Effect which has not been specifically disclosed to the Purchasers by the Company. The Company last filed audited financial statements with the Commission on March 28, 1997, and has not received any comments from the Commission in respect thereof. (l) SENIORITY. No class of equity securities of the Company is senior to the Preferred Stock in right of payment, whether upon liquidation, dissolution or otherwise. (m) INVESTMENT COMPANY. The Company is not, and is not controlled by or under common control with an affiliate (an "AFFILIATE") of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (n) CERTAIN FEES. Except for fees payable to Brown Simpson Asset Management, LLC ("BSAM") pursuant to Section 3 of the letter agreement dated January 9, 1998 between the Company and BSAM, as amended (the "ENGAGEMENT LETTER") and a finder's fee payable to CIBC Oppenheimer Corp. in connection with the introduction of BSAM to the Company (the parties hereto acknowledge that CIBC Oppenheimer Corp. acted merely as a finder and not as an agent of either the Purchasers or the Company and will not and has not, in connection with the transactions contemplated by this Agreement, provided any other services to the Purchasers or the Company except for introducing BSAM to the Company), no fees or commissions will be payable by the Company to any broker, financial advisor, finder, investment banker, or bank with respect to the transactions contemplated by this Agreement. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold harmless each of the Purchasers, its employees, officers, directors, agents, and partners, and their respective Affiliates (as such term is defined under Rule 405 promulgated under the Securities Act), from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees. (o) SOLICITATION MATERIALS. The Company has not (i) distributed any offering materials in connection with the offering and sale of the Shares, the Warrants or the Underlying Shares other than the Disclosure Materials and any amendments and supplements thereto or (ii) solicited any offer to buy or sell the Shares, the Warrants or the Underlying Shares by means of any form of general solicitation or advertising. None of the Disclosure Materials or any other information provided to the Purchasers by or on behalf of the Company contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. -8- (p) FORM S-3 ELIGIBILITY. The Company is, and at each Closing Date will be, eligible to register securities for resale with the Commission under Form S-3 promulgated under the Securities Act. (q) EXCLUSIVITY. The Company shall not issue and sell the Preferred Stock to any Person other than the Purchasers pursuant to this Agreement other than with the specific prior written consent of each of the Purchasers. (r) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The Company has not in the two years preceding the date hereof received notice (written or oral) from any stock exchange, market or trading facility on which the Common Stock is or has been listed (or on which it has been quoted) to the effect that the Company is not in compliance with the listing or maintenance requirements of such exchange or market. Immediately prior to and giving effect to the transactions contemplated in this Agreement, the Company is in compliance with all such maintenance requirements. (s) PATENTS AND TRADEMARKS. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and rights (collectively, the "INTELLECTUAL PROPERTY RIGHTS") which are necessary for use in connection with its business, as currently conducted and as described in the SEC Documents, and which the failure to so have would have a Material Adverse Effect. Except as disclosed in SCHEDULE 2.1(s) to the Disclosure Letter, to the best knowledge of the Company, there is no existing infringement by another Person of any of the Intellectual Property Rights which are necessary for use in connection with the Company's business. (t) ACKNOWLEDGEMENT OF DILUTION. The Company acknowledges that the issuance of the Underlying Shares upon (i) conversion of the Shares and payment of dividends thereon in accordance with the Certificates of Determination and (ii) exercise of the Warrants may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue Underlying Shares upon (x) conversion of the Shares and payment of dividends thereon in accordance with the Certificates of Determination and (y) upon exercise of the Warrants is unconditional and absolute subject to the limitations set forth herein in the Certificate of Determination or pursuant to the Warrants, regardless of the effect of any such dilution. (u) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as described on SCHEDULE 2.1(u) to the Disclosure Letter, (A) the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied and (B) no Person, including, but not limited to, current or former shareholders of the Company, underwriters, brokers or agents, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement or any other Transaction Document. -9- (v) TITLE. The Company owns no real property and, except as disclosed in SCHEDULE 2.1(v) to the Disclosure Letter, the Company and the Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all Liens, except for liens, claims or encumbrances as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. (w) REGULATORY PERMITS. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate Federal, state or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Documents except where the failure to possess such permits would not, individually or in the aggregate, have a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. 2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the Purchasers, severally and not jointly, hereby represents and warrants to the Company as follows: (a) ORGANIZATION; AUTHORITY. Each Purchaser is a corporation duly incorporated or a limited partnership duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with the requisite power and authority, corporate or otherwise, to enter into and to consummate the transactions contemplated hereby and by the Registration Rights Agreement and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Purchaser of the Shares and the Warrants hereunder has been duly authorized by all necessary action on the part of such Purchaser. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by such Purchaser and constitutes the valid and legally binding obligation of such Purchaser, enforceable against such Purchaser, in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity. (b) INVESTMENT INTENT. Each Purchaser is acquiring the Shares, the Warrants and the Underlying Shares for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares, Warrants or Underlying Shares or any part thereof or interest therein, without prejudice, however, to such Purchaser's right, subject to the provisions of this Agreement and the Registration Rights Agreement, at all times to sell or otherwise dispose of all or any part of such Shares, Warrants or Underlying Shares pursuant to an effective registration statement under the Securities Act and in compliance with applicable State securities laws or under an exemption from such registration. -10- (c) PURCHASER STATUS. At the time such Purchaser was offered the Shares and the Warrants, it was, and at the date hereof, it is, and at each Closing Date and each exercise date under the Warrants, it will be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. (d) EXPERIENCE OF PURCHASER. Each Purchaser either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, the Warrants and the Underlying Shares, and has so evaluated the merits and risks of such investment. (e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Each Purchaser is able to bear the economic risk of an investment in the Shares, the Warrants and the Underlying Shares and, at the present time, is able to afford a complete loss of such investment. (f) ACCESS TO INFORMATION. Each Purchaser acknowledges receipt of the Disclosure Materials and further acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares, the Warrants and the Underlying Securities and the merits and risks of investing in the Shares, the Warrants and the Underlying Securities; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information contained in the Disclosure Materials. (g) RELIANCE. Each Purchaser understands and acknowledges that (i) the Shares and the Warrants are being offered and sold to the Purchaser without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act or Regulation D promulgated thereunder and (ii) the availability of such exemption, depends in part on, and the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance. The Company acknowledges and agrees that the Purchasers make no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 2.2. ARTICLE III OTHER AGREEMENTS OF THE PARTIES 3.1 TRANSFER RESTRICTIONS. (a) If any Purchaser should decide to dispose of Shares or any portion of the Warrants (and upon conversion or exercise thereof, as the case may be, any of the -11- Underlying Shares) held by it, each Purchaser understands and agrees that it may do so only pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act. In connection with any transfer of any Shares or any Underlying Shares other than pursuant to an effective registration statement or to the Company, the Company may require the transferor thereof to provide to the Company a written opinion of counsel experienced in the area of United States securities laws selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register (i) any transfer of Shares or Warrants by one Purchaser to another Purchaser, and agrees that no documentation other than executed transfer documents shall be required for any such transfer, and (ii) any transfer of Shares or Warrants by any Purchaser to an Affiliate of such Purchaser or to an Affiliate of another Purchaser, or any transfer among any such Affiliates, provided that transferee certifies to the Company that it is an "accredited investor" as defined in Rule 501(a) under the Securities Act and that the matters set forth in Sections 2.2(b) through (f) are true with respect to it. Any such transferee shall be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement. (b) Each Purchaser agrees to the imprinting, so long as is required by this Section 3.1(b), of the following legend on the Shares, the Warrants and the Underlying Shares: [NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE] [THE SECURITIES REPRESENTED HEREBY HAVE NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. [FOR SHARES ONLY] THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF FEBRUARY 2, 1998, EXECUTED BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF GENUS, INC. The Underlying Shares issuable upon conversion of the Shares or as payment of dividends thereon or exercise of the Warrants shall not contain the legend set forth above if in the written opinion of counsel to the Company experienced in the area of United States securities laws -12- such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company agrees that it will provide each Purchaser, upon request, with a certificate or certificates representing Underlying Shares, free from such legend at such time as such legend is no longer required hereunder. 3.2 STOP TRANSFER INSTRUCTION. The Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions of transfer set forth in Section 3.1. 3.3 FURNISHING OF INFORMATION. As long as any Purchaser owns Shares, Warrants or Underlying Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any Purchaser owns Shares, Warrants or Underlying Shares, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any holder of Shares may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including the legal opinion referenced above in this Section. Upon the request of any such Person, the Company shall deliver to such Person a written certification of a duly authorized officer as to whether it has complied with such requirements. 3.4 BLUE SKY LAWS. In accordance with the Registration Rights Agreement, the Company shall qualify or obtain exemptions for the Underlying Shares under the securities or Blue Sky laws of such jurisdictions as the Purchasers may request and shall continue such qualification at all times through the third anniversary of the last Closing Date; PROVIDED, HOWEVER, that neither the Company nor its Subsidiaries shall be required in connection therewith to qualify as a foreign corporation where they are not now so qualified or to take any action that would subject the Company to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. 3.5 INTEGRATION. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares, the Warrants or the Underlying Shares in a manner that would require the registration under the Securities Act of the sale of the Shares, the Warrants or the Underlying Shares to any Purchaser. -13- 3.6 CERTAIN AGREEMENTS. As long as any Purchaser owns Shares, the Company shall not, and shall cause the Subsidiaries not to, without the consent of the holders of all of the Shares then outstanding, (i) amend its articles of incorporation, bylaws or other charter documents so as to adversely affect any rights of any Purchaser; (ii) declare, authorize, set aside or pay any dividend or other distribution with respect to the Common Stock except as permitted under the Certificates of Determination and as would not adversely affect the rights of any Purchaser hereunder or under the Certificates of Determination; (iii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its Common Stock in any manner; or (iv) enter into any agreement with respect to any of the foregoing. 3.7 LISTING AND RESERVATION OF UNDERLYING SHARES. (a) The Company shall (i) not later than the applicable Closing Date prepare and file with the Nasdaq Stock Market (as well as any other national securities exchange or market on which the Common Stock is then listed) an additional shares listing application or a letter acceptable to the Nasdaq Stock Market covering and listing such number of shares of Common Stock, as required by the Registration Rights Agreement, (ii) take all steps necessary to cause the Underlying Shares to be approved for listing in the Nasdaq Stock Market (as well as on any other national securities exchange or market on which the Common Stock is then listed) as soon as possible thereafter, and (iii) provide to the Purchasers evidence of such listing, and the Company shall maintain the listing of its Common Stock on such exchange. (b) The Company shall reserve for issuance shares of Common Stock issuable upon conversion of the Shares and for payment of dividends thereupon in shares of Common Stock pursuant to the terms of the Certificates of Determination and upon exercise of the Warrants in accordance with their terms the number of shares to be listed on the Nasdaq Stock Market (and such other national securities exchange or market on which the Common Stock is then listed or traded) as set forth in Section 3.7(a). Shares of Common Stock reserved for issuance upon the conversion of the Shares as set forth in Section 3.7(a) shall be allocated pro rata to each of the Purchasers in accordance with the amount of Shares issued and delivered to such Purchaser at each Closing, as applicable. 3.8 NO VIOLATION OF APPLICABLE LAW. Notwithstanding any provision of this Agreement to the contrary, if the redemption of Shares or Underlying Shares otherwise required under this Agreement or the Registration Rights Agreement would be prohibited by the relevant provisions of the California General Corporations Law, such redemption shall be effected as soon as it is permitted under such law; PROVIDED, HOWEVER, that from the 5th day after such redemption notice until such redemption price is paid in full, a late fee on any such unpaid amount shall accrue at the rate of 15% per annum. 3.9 NOTICE OF BREACHES. (a) The Company and each Purchaser shall give prompt written notice to the other of any breach of any representation, warranty or other agreement contained in this Agreement or in the Registration Rights Agreement, as well as any events or occurrences arising after the date hereof and prior to, with respect to the Series B Closing, the Series B Closing Date, which would reasonably be likely to cause any representation or warranty or other agreement of such party, -14- as the case may be, contained herein to be incorrect or breached as of such Closing Date. However, no disclosure by either party pursuant to this Section 3.9 shall be deemed to cure any breach of any representation, warranty or other agreement contained herein or in the Registration Rights Agreement. (b) Notwithstanding the generality of Section 3.9(a), the Company shall promptly notify each Purchaser of any notice or claim (written or oral) that it receives from any lender of the Company to the effect that the consummation of the transactions contemplated hereby and by the Registration Rights Agreement violates or would violate any written agreement or understanding between such lender and the Company, and the Company shall promptly furnish by facsimile to the holders of the Shares a copy of any written statement in support of or relating to such claim or notice. (c) The default by any Purchaser of any of its obligations, representations or warranties under any Transaction Document shall not be imputed to, and shall have no effect upon, any other Purchaser or affect the Company's obligations under the Transaction Documents to any non-defaulting Purchaser. 3.10 CONVERSION OBLIGATIONS OF THE COMPANY. The Company covenants to convert Shares and to deliver Underlying Shares in accordance with the terms and conditions and time period set forth in the respective Certificates of Determination and to deliver Underlying Shares upon exercise of Warrants in accordance with the terms and conditions and time periods set forth in the Warrants. 3.11 SUBSEQUENT REGISTRATIONS. Other than Underlying Shares and other "Registrable Securities" (as defined in the Registration Rights Agreement) to be registered in accordance with the Registration Rights Agreement, the Company shall not, for a period of not less than 90 Trading Days after the date that each Underlying Shares Registration Statement relating to the securities issued at the Series A Closing Date and the Series B Closing Date is declared effective by the Commission, without the prior written consent of the Purchasers, (i) issue or sell any of its or any of its Affiliates' equity or equity-equivalent securities pursuant to Regulation S promulgated under the Securities Act, or (ii) register for resale any securities of the Company. Any days that any Purchaser is unable to sell Underlying Shares under an Underlying Shares Registration Statement shall be added to such 90 Trading Day period for the purposes of (i) and (ii) above. 3.12 PRESS RELEASE. The Company shall issue a press release in connection with the transactions contemplated herein, relating to the issue and sale of the Shares and Warrants to the Purchasers which press release shall be approved by the Company and BSAM. 3.13 USE OF PROCEEDS. The Company shall use all of the proceeds from the sale of the Shares for working capital and general corporate purposes and not for the satisfaction of any portion of Company borrowings or to redeem Company equity or equity-equivalent securities. Pending application of the proceeds of this placement in the manner permitted hereby, the Company will invest such proceeds in interest bearing accounts and/or short-term, investment grade interest bearing securities. -15- 3.14 REIMBURSEMENT. In the event that any Purchaser, other than by reason of its gross negligence or willful misconduct, or the breach of any representation, warranty or covenant in this Agreement or in connection with any information furnished by such Purchaser for use in any Registration Statement, becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders of the Company, in connection with or as a result of the consummation of the transactions contemplated pursuant to the Transaction Documents, the Company will reimburse such Purchaser for its legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of each Purchaser and partners, directors, agents, employees and controlling persons (if any), as the case may be, of each Purchaser and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, each Purchaser and any such affiliate and any such person. The Company also agrees that no Purchaser or any such affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of such Purchaser or entity in connection with the transactions contemplated by this Agreement. 3.15 SERIES B OBLIGATION. Notwithstanding anything to the contrary contained in this Agreement, if there is a Change of Control prior to the Series B Closing Date, neither the Company nor the Purchasers shall be obligated to sell or to purchase the Series B Shares. 3.16 CONVERSION LIMITATION. In no event shall a Purchaser be permitted to convert any shares of Preferred Stock in excess of the number of such shares upon the conversion of which, (x) the number of shares of Common Stock beneficially owned by such Purchaser (other than shares of Common Stock issuable upon conversion of shares of Preferred Stock) PLUS (y) the number of shares of Common Stock issuable upon the conversion of such shares of Preferred Stock, would be equal to or exceed (z) 4.999% of the number of shares of Common Stock then issued and outstanding, including shares issuable on conversion of the Preferred Stock held by such Purchaser after application of this Section 3.16. As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder. To the extent that the limitation contained in this Section 3.16 applies, the determination of whether shares of Preferred Stock are convertible (in relation to other securities owned by a Purchaser) and of which shares of Preferred Stock are convertible shall be in the sole discretion of such Purchaser, and the submission of shares of Preferred Stock for conversion shall be deemed to be such Purchaser's determination of whether such shares of Preferred Stock are convertible (in relation to other securities owned by a Purchaser) and of which shares of Preferred Stock are convertible, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. This paragraph may be amended (i) in order to clarify an ambiguity -16- or otherwise to give effect to such limitation, by the board of directors of the Company and the holders of two-thirds (2/3) of the shares of Preferred Stock then outstanding. Nothing contained herein shall be deemed to restrict the right of a Purchaser to convert such shares of Preferred Stock at such time as such conversion will not violate the provisions of this paragraph. The provisions of this Section 3.16 may be waived by a Purchaser as to itself (and solely as to itself) upon not less than 65 days prior notice to the Company, and the provisions of this Section 3.16 shall continue to apply until such 65th day (or later, if stated in the notice of waiver). 3.17 PAYMENT RESTRICTIONS. Notwithstanding any provision of the Transaction Documents (as defined in the Purchase Agreement) to the contrary, if payment of any amounts payable by the Company to the Purchasers under the Transaction Documents, including, without limitation, any amounts payable as dividends, penalties or upon redemption of Shares or Underlying Shares, would be prohibited in the absence of consent from Sumitomo Bank of California pursuant to the Company's Credit Agreement dated August 15, 1997 with Sumitomo Bank of California ("SUMITOMO"), as the same may be amended, supplemented, superseded or replaced from time to time or any replacement facility (the "CREDIT AGREEMENT"), then the Company shall use its best efforts to obtain such consent as promptly as practicable after any such payment is required, and any amounts payable by the Company with respect to its obligation to pay any such dividends, penalties, or redemption payments shall continue to accrue until such consent is obtained. Nothing contained in this Section 3.17 shall be construed as a waiver by the Purchasers of any rights they may have under any of the Transaction Documents. 3.18 BANK LOAN PAYMENT RESTRICTIONS. The Company hereby covenants it will not, from the date of this Agreement through the later of (i) the date which is 180 days from the date of this Agreement and (ii) the date which is 90 days subsequent to the date of the effectiveness of the Registration Statement required to be filed by the Company with respect to the Series A Shares under the Registration Rights Agreement, voluntarily repay or pay down any portion of any of its bank debt, including, without limitation, any amounts due under the Credit Agreement, and the Company hereby further covenants that it will not, from the date of the Series B Closing Date through the later of (i) the date which is 180 days from the Series B Closing Date and (ii) the date which is 90 days subsequent to the date of the effectiveness of the Registration Statement required to be filed by the Company with respect to the Series B Shares under the Registration Rights Agreement, repay or pay down any portion of any of its bank debt, including, without limitation, any amounts due under the Credit Agreement; provided, however, that the foregoing shall not prohibit the Company from paying any such bank debt upon acceleration of such bank debt or at maturity. 3.19 STANDSTILL. The Company hereby agrees that, except for the transactions contemplated by this Agreement, it will not, without the prior written consent of the Purchasers, enter into any agreement to sell or sell any of its or any of its Affiliates' equity or equity-equivalent securities for the 45 day period subsequent to the date of this Agreement. -17- ARTICLE IV CONDITIONS 4.1 (a) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL THE SERIES A SHARES. The obligation of the Company to sell the Series A Shares and the Series A Warrants hereunder is subject to the satisfaction or waiver by the Company, at or before the Series A Closing, of each of the following conditions: (i) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND WARRANTIES. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Series A Closing Date, as though made on and as of such date; (ii) PERFORMANCE BY THE PURCHASERS. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Series A Closing; and (iii) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement or the Registration Rights Agreement relating to the issuance or conversion of any of the Shares or exercise any of the Warrants. (b) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO PURCHASE THE SERIES A SHARES. The obligation of each Purchaser hereunder to acquire and pay for the Series A Shares and the Series A Warrants is subject to the satisfaction or waiver by such Purchaser, at or before the Series A Closing, of each of the following conditions: (i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company set forth in this Agreement and in the Registration Rights Agreement shall be true and correct in all material respects as of the date when made and as of the Series A Closing Date as though made on and as of such date; (ii) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Series A Closing; (iii) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the -18- transactions contemplated by this Agreement or the Registration Rights Agreement relating to the issuance or conversion of any of the Shares or exercise of any of the Warrants. (iv) ADVERSE CHANGES. Since the date of the financial statements included in the Company's Quarterly Report on Form 10-Q or Annual Report on Form 10-K, whichever is more recent, last filed prior to the date of this Agreement, no event which had a Material Adverse Effect and no material adverse change in the financial condition or prospects of the Company shall have occurred which is not disclosed in the Disclosure Materials (for purposes hereof changes in the market price of the Common Stock may be considered in determining whether there has occurred an event which has had a Material Adverse Effect or whether a material adverse change has occurred); (v) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in the Common Stock shall not have been suspended by the Commission or on the Nasdaq Stock Market which suspension shall remain in effect. (vi) LISTING OF COMMON STOCK. The Company shall have filed a listing application to list those shares required to be listed by the Registration Rights Agreement in connection with the Series A Closing for trading on the Nasdaq Stock Market; (vii) LEGAL OPINION. The Company shall have delivered to the Purchasers the opinion of Wilson Sonsini Goodrich & Rosati, professional corporation, outside counsel to the Company, in substantially the form attached hereto as EXHIBIT D; (viii) REQUIRED APPROVALS. All Required Approvals shall have been obtained other than those relating solely to the Series B Shares; (ix) SHARES OF COMMON STOCK. On or prior to the Series A Closing Date, the Company shall have duly reserved the number of Underlying Shares required by the Transaction Documents to be reserved for issuance upon conversion of Series A Shares and payment of dividends thereon and exercise of the Warrants; (x) DELIVERY OF STOCK CERTIFICATES. The Company shall have delivered to each Purchaser or such Purchaser's designee the stock certificate(s) representing the Series A Shares, registered in the name of such Purchaser, each in form satisfactory to the Purchaser; (xi) REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and delivered the Registration Rights Agreement; (xii) CERTIFICATE OF DETERMINATION. The Series A Determination shall have been duly filed with the Secretary of State of California, and the Company shall have delivered a copy thereof to the Purchaser certified as filed by the office of the Secretary of State of California; -19- (xiii) CHANGE OF CONTROL. No Change of Control (as hereafter defined) shall have occurred between the date hereof and the Series A Closing Date; (xiv) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer Agent Instructions, in the form of EXHIBIT E attached hereto, shall have been delivered to and acknowledged in writing by the Company's transfer agent; (xv) BANK WAIVER. The Company shall have delivered to the Purchasers a fully executed waiver and consent or amendment to the Credit Agreement, which waiver or amendment shall be in form and substance satisfactory to the Purchasers, of Sumitomo (the "BANK WAIVER"), which shall permit the Company under the provisions of the Credit Agreement to pay up to $250,000 to the Purchasers in payment of any penalties due to the Purchasers under any of the Transaction Documents so long as there is no event of default under the Credit Agreement; (xvi) SUBSIDIARY. Ionex/Hei Corporation shall be in good standing in the State of Massachusetts; and (xvii) OFFICER'S CERTIFICATE. On the Series A Closing Date, the Company shall deliver to the Purchasers an Officer's Certificate dated the Series A Closing Date and signed by an executive officer of the Company confirming the accuracy of the Company's representations, warranties and covenants as of such Series A Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.1 as of such Series A Closing Date. 4.2 (a) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL THE SERIES B SHARES. The obligation of the Company to sell the Series B Shares and the Series B Warrants hereunder is subject to the satisfaction or waiver by the Company, at or before the Series B Closing, of each of the following conditions: (i) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND WARRANTIES. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Series B Closing Date, as though made on and as of such date; (ii) PERFORMANCE BY THE PURCHASERS. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Series B Closing Date; and (iii) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement or the Registration Rights Agreement relating to the issuance or conversion of any of the Shares or exercise of any of the Warrants. -20- (b) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO PURCHASE THE SERIES B SHARES. The obligation of each Purchaser hereunder to acquire and pay for the Series B Shares and the Series B Warrants is subject to the satisfaction or waiver by each Purchaser, at or before the Series B Closing of each of the following conditions: (i) CLOSINGS. Prior to the Series B Closing, the Series A Closing shall have occurred; (ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained herein and in the Registration Rights Agreement shall be true and correct in all material respects as of the date when made and as of the Series B Closing Date, as though made on and as of such date; (iii) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or prior to the Series B Closing Date; (iv) UNDERLYING SHARES REGISTRATION STATEMENTS. With respect to the Series B Closing, the Underlying Shares Registration Statement with respect to the Underlying Shares issuable on conversion of all outstanding Series A Shares and as payment of dividends thereon and exercise of the Warrants shall have been declared effective under the Securities Act by the Commission; and on such Closing Date such Underlying Shares Registration Statement shall be effective, not subject to any stop order and not be subject to any suspension pursuant to Section 3(p) of the Registration Rights Agreement, and shall have been effective and shall not have been subject to any stop order for the ninety (90) days prior to such Closing Date and no stop order shall be pending or threatened as at such Closing Date; (v) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court of governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement or the Registration Rights Agreement relating to the issuance or conversion of any of the Shares or exercise of any of the Warrants; (vi) ADVERSE CHANGE TO STOCK PRICE. During the period which is 30 Trading Days prior to the date of the Series B Closing, the closing bid price on the Common Stock shall not have decreased by more than 35% from the highest closing bid price during such period; (vii) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in the Common Stock shall not have been suspended by the Commission or on the Nasdaq Stock Market (except for any suspension of trading of limited duration solely to permit dissemination of material information regarding the Company); -21- (viii) LISTING OF COMMON STOCK. The Common Stock shall have been at all times since the Series A Closing Date, and on the Series B Closing Date be listed for trading on the Nasdaq Stock Market or Nasdaq SmallCap Market; (ix) CHANGE OF CONTROL. No Change of Control in the Company shall have occurred. "CHANGE OF CONTROL" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in excess of 50% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company's board of directors which is not approved by those individuals who are members of the Company's board of directors on the date hereof in one or a series of related transactions, (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii); (x) LEGAL OPINION. The Company shall have delivered to the Purchasers the opinion of the Company's outside counsel, in substantially the form attached hereto as EXHIBIT D dated the applicable Closing Date; (xi) REQUIRED APPROVALS. All Required Approvals shall have been obtained; (xii) SHARES OF COMMON STOCK. On the Series B Closing Date, the Company shall have duly reserved the number of Underlying Shares required by this Agreement to be reserved for issuance upon conversion of Series B Shares, respectively, and payment of dividends thereon; (xiii) DELIVERY OF STOCK CERTIFICATES. The Company shall have delivered to each Purchaser or such Purchaser's designee the stock certificate(s) representing the Shares, being purchased at such Closing, registered in the name of such Purchaser, each in form satisfactory to such Purchaser; (xiv) PERFORMANCE OF CONVERSION/EXERCISE OBLIGATIONS. The Company shall have (a) delivered Underlying Shares upon conversion of Shares and otherwise performed its obligations in accordance with the terms, conditions and timing requirements of each Certificate of Determination and (b) delivered Underlying Shares upon exercise of the Warrants and otherwise performed its obligations in accordance with the terms of the Warrants; (xv) SHAREHOLDER APPROVAL. If due to the issuance or conversion of Shares issued in the Series B Closing, the Company would be required to receive shareholder approval in order to satisfy the shareholder approval provisions of the Nasdaq Stock Market, or any other exchange or market on which the Common Stock is then listed or traded, with respect to the issuance of 20% or more of a company's capital stock, or any similar stockholder approval requirements, then the Company shall have satisfied such shareholder approval requirement; -22- (xvi) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer Agent Instructions, in the form of EXHIBIT E attached hereto, shall have been delivered to and acknowledged in writing by the Company's transfer agent; (xvii) BANK WAIVER. So long as the Credit Agreement is in effect, the Bank Waiver shall be in full force and effect; and (xviii) OFFICER'S CERTIFICATE. On the Series B Closing Date, the Company shall deliver to the Purchasers an Officer's Certificate dated the Series B Closing Date and signed by an executive officer of the Company confirming the accuracy of the Company's representations, warranties and covenants as of such Series B Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of such Series B Closing Date. ARTICLE V MISCELLANEOUS 5.1 FEES AND EXPENSES. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, except as set forth in the Registration Rights Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Shares pursuant hereto. 5.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Exhibits and Schedules hereto, including, without limitations, the Schedules to the Disclosure Letter, the Registration Rights Agreement and each Certificate of Determination (each when filed) and the Warrants contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, except that the provisions of Section 3 and Section 5 of the Engagement Letter shall survive. 5.3 NOTICES. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered on a business day after during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall as set forth below each parties name on SCHEDULE 1, and if to the Company with copies to Wilson Sonsini Goodrich & Rosati, Attn: Andrew J. Hirsch, Esq., -23- fax: (650) 354-4210 and if to any Purchaser with copies to Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, NY 10104, Attn: Kenneth L. Henderson, Esq., fax: (212) 541-4630, or such other address as may be designated in writing hereafter, in the same manner, by such person. 5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchasers; or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 5.5 HEADINGS. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each of the Purchasers. No Purchaser may assign this Agreement (other than to an Affiliate of such Purchaser) or any rights or obligations hereunder without the prior written consent of the Company, except that any Purchaser may assign its rights hereunder and under the Transaction Documents without the consent of the Company as long as such assignee demonstrates to the reasonable satisfaction of the Company its satisfaction of the representations and warranties set forth in Section 2.2 and its financial ability to perform its obligations under the Transaction Documents. This provision shall not limit a Purchaser's right to transfer securities or transfer or assign rights hereunder or under the Registration Rights Agreement. 5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 5.8 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and Federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and -24- sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 5.9 SURVIVAL. The agreements and covenants contained in Article III and this Article V shall survive the delivery and conversion of the Shares pursuant to this Agreement and the representations and warranties of the Company and the Purchasers contained in Article II shall survive each Closing hereunder and any conversion of Shares and exercise of the Warrants. 5.10 EXECUTION. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 5.11 PUBLICITY. The Company and each Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. The Company shall not publicly or otherwise disclose the names of any of the Purchasers without each such Purchaser's prior written consent. 5.12 SEVERABILITY. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affecting or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 5.13 REMEDIES. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchasers will be entitled to specific performance of the obligations of the Company under the Transaction Documents. Each of the Company and the Purchasers (severally and not jointly) agree that monetary damages would not be adequate compensation for any loss incurred by reason of any breach of its obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. 5.14 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The obligations of each Purchaser hereunder is several and not joint with the obligations of the other Purchasers hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at any -25 Closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. 5.15 NO RELIANCE. Each party acknowledges that (i) it has such knowledge in business and financial matters as to be fully capable of evaluating this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, (ii) it is not relying on any advice or representation of the other party in connection with entering into this Agreement, the other Transaction Documents or such transactions (other than the representations made in this Agreement or the other Transaction Documents), (iii) it has not received from such party any assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of entering into this Agreement or the other Transaction Documents or the performance of its obligations hereunder and thereunder, and (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and has entered into this Agreement and the other Transaction Documents based on its own independent judgment and on the advice of its advisors as it has deemed necessary, and not on any view (whether written or oral) expressed by such party. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOLLOWS] -26- IN WITNESS WHEREOF, the parties hereto have caused this Convertible Preferred Stock Purchase Agreement to be duly executed by their respective authorized persons as of the date first indicated above.
GENUS, INC. SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD By: /s/ MARY F. BOBEL By: /s/ KENNETH L. HENDERSON ------------------------ ------------------------------------- Name: Mary F. Bobel Name: Kenneth L. Henderson Title: Executive Vice President Title: Attorney-in-fact and Chief Financial Officer WESTOVER INVESTMENTS L.P. By: HBK Investments L.P., as investment manager By: /s/ DAVID C. HALEY ----------------------------------- Name: David C. Haley Title: Authorized Agent MONTROSE INVESTMENTS, LTD. By: HBK Investments L.P., as investment manager By: /s/ DAVID C. HALEY ----------------------------------- Name: David C. Haley Title: Authorized Agent BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: /s/ EVAN M. LEVINE ----------------------------------- Name: Evan M. Levine Title: Principal BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: /s/ EVAN M. LEVINE ----------------------------------- Name: Evan M. Levine Title: Principal
SCHEDULE 1 COMPANY: GENUS, INC. 1139 Karlstad Drive Sunnyvale, California 94089 Attn: Mary Bobel Fax: (408) 747-7140 PURCHASERS: SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD. c/o Trippoak Advisors, Inc. 630 Fifth Avenue, Suite 2000 New York, NY 10111 Attn: Robert L. Miller Fax: (212) 332-3256 Portion of Series A Purchase Price - $2,500,000 Series A Shares - 50,000 Number of Shares underlying Series A Warrant - 150,000 WESTOVER INVESTMENTS L.P. 777 Main Street, Suite 2750 Fort Worth, Texas 76102 Attn: Will Rose Fax: (817) 870-6190 Portion of Series A Purchase Price - $800,000 Series A Shares - 16,000 Number of Shares underlying Series A Warrant - 48,000 MONTROSE INVESTMENTS, LTD. 777 Main Street, Suite 2750 Fort Worth, Texas 76102 Attn: Will Rose Fax: (817) 870-6190 Portion of Series A Purchase Price - $1,200,000 Series A Shares - 24,000 Number of Shares underlying Series A Warrant - 72,000 -28- BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. 152 West 57th street, 40th Floor New York, New York 10019 Attn: Mitchell Kaye Fax: (212) 247-1329 Portion of Series A Purchase Price - $100,000 Series A Shares - 2,000 Number of Shares underlying Series A Warrant - 6,000 BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. 152 West 57th street, 40th Floor New York, New York 10019 Attn: Mitchell Kaye Fax: (212) 247-1329 Portion of Series A Purchase Price - $400,000 Series A Shares - 8,000 Number of Shares underlying Series A Warrant - 24,000 -29- SCHEDULE 2.1 GENUS, INC. DISCLOSURE LETTER To: Southbrook International Investments, Ltd., Westover Investments L.P., Montrose Investments Ltd., Brown Simpson Strategic Growth Fund, L.P., and Brown Simpson Strategic Growth Fund Ltd. (the "Purchasers") under that certain Convertible Preferred Stock Purchase Agreement, dated as of February 2, 1998 (the "Purchase Agreement"), and Genus, Inc., a California corporation (the "Company"). This Disclosure Letter is delivered pursuant to Section 2.1 of the Purchase Agreement. The disclosure set forth in the attached Schedules represents exceptions, qualifications and other disclosures pursuant to certain of the representations and warranties set forth in Section 2.1 of the Purchase Agreement. Capitalized terms used herein (or in the attached Schedules) and defined in the Purchased Agreement shall have the meanings ascribed in the Purchase Agreement, unless the context otherwise requires. This Disclosure Letter may not be amended or revised without the written consent of the Company and the Purchasers. This Disclosure letter may be executed in any number of separate counterparts, each of which when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. IN WITNESS WHEREOF, the undersigned has executed this Disclosure Letter as of February 12, 1998. GENUS, INC., a California corporation By: /s/ MARY F. BOBEL -------------------------- Name: Mary Bobel Title: Executive Vice President and Chief Financial Officer Schedule 2.1(a) ORGANIZATION AND QUALIFICATION Subsidiaries Genus Subsidiary Corporation (a California corporation) 1139 Karlstad Drive Sunnyvale, CA 94089 General Ionex Corporation (a Massachusetts corporation) 4 Stanley Tucker Drive Newburyport, MA 01950 Ionex/HEI Corporation ("Ionex") (a Massachusetts corporation) 4 Stanley Tucker Drive Newburyport, MA 01950 Genus Europa SARL Zac du Clos aux Pois CE 487, Lisses 91048 Evry Cedex, France 011-331-69-89-79-20 Genus Korea, Ltd. 3F, KEC Building #275-7, Yangjae-Dong Seocho-Ku, Seoul, Korea 011-822-589-4800 Genus, KK Shin Yokohama West Building 2-3-3 Shin Yokohama, Kouhoku-ku Yokohama, Japan 222 011-81-45-476-0851 Because Ionex had failed to file Annual Reports as required by the Secretary of the Commonwealth of Massachusetts, the Secretary of the Commonwealth had administratively dissolved the corporation. Upon the Company's filing of the Annual Reports and Application for Revival and payment of fees, the Secretary of the Commonwealth revived Ionex on February 9, 1998 as if the corporation had not been dissolved. Schedule 2.1 (c) CAPITALIZATION The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock, no par value, and 2,000,000 shares of Preferred Stock, no par value. As of December 31, 1997, 16,969,546 shares of Common Stock were outstanding and no other shares of capital stock were outstanding. The Company has reserved 1,750,000 shares of Common Stock for issuance under its 1989 Employee Stock Purchase Plan and as of December 31, 1997, 124,914 shares remained available for future grants. The Company has reserved 3,503,000 shares of Common Stock for issuance under its 1991 Incentive Stock Option Plan and as of December 31, 1997, 885,236 shares remained available for future grants. The Company is obligated to issue warrants to purchase up to 150,000 shares of Common Stock pursuant to a purchase order agreement with Innotech Corporation. The Company is obligated to issue warrants to purchase up to 100,000 shares of Common Stock to CIBC Oppenheimer Corp. pursuant to the Engagement Letter dated January 8, 1998. Pursuant to the Common Shares Rights Agreement, dated April 27, 1990, between the Company and Bank of America, N.T. & S.A.,as Rights Agent (the "Rights Agreement"), the Board of Directors of the Company authorized and declared a dividend of one Common Share purchase right (a "Right") for each Common Share of the Company outstanding as of July 3, 1990 and with respect to each Common Share that would become outstanding between the Record Date and the earlier of the Distribution Date and the Expiration Date, each Right representing the right to purchase one Common Share upon the occurrence of certain Triggering Events as set forth in the Rights Agreement. (The terms in this paragraph which begin with a capitalized letter have the meanings set forth in the Rights Agreement.) Schedule 2.1(f) CONSENTS AND APPROVALS None Schedule 2.1(k) SEC DOCUMENTS, FINANCIAL STATEMENTS, NO ADVERSE CHANGE None Schedule 2.1(s) PATENTS AND TRADEMARKS None Schedule 2.1(u) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION None Schedule 2.1(v) TITLE Liens Disclosed in the following financing statements:
- --------------------------------------------------------------------------------------------------------------- SECURED PARTY JURISDICTION FILING DATE FILE NUMBER FILE TYPE COMMENTS - --------------------------------------------------------------------------------------------------------------- Signal Capital California 03/04/88 88046502 Original Precautionary Corporation - --------------------------------------------------------------------------------------------------------------- Signal Capital California 12/07/92 88046502 Continuation/ Corporation / Assignment Assignee Fleet Credit Corp. - --------------------------------------------------------------------------------------------------------------- Signal Capital California 03/04/88 88046503 Original Precautionary Corporation - --------------------------------------------------------------------------------------------------------------- Signal Capital California 12/07/92 88046503 Continuation/ Corporation / Assignment Assignee Fleet Credit Corp. - --------------------------------------------------------------------------------------------------------------- JLA Credit California 12/09/92 92262193 Original Precautionary Corporation - --------------------------------------------------------------------------------------------------------------- Gestetner Services, California 12/28/92 92274831 Original Equipment Inc. - --------------------------------------------------------------------------------------------------------------- Energy Reduction California 02/02/94 94021670 Original Equipment Systems, Inc. - --------------------------------------------------------------------------------------------------------------- Clarklift of San California 03/08/94 94046091 Original Equipment Jose, Inc./ Assignee Clark Credit Corporation - --------------------------------------------------------------------------------------------------------------- Gestetner Services California 05/04/95 9512860043 Original Equipment Inc. - --------------------------------------------------------------------------------------------------------------- Oce California 08/10/95 9522660711 Original Equipment - --------------------------------------------------------------------------------------------------------------- Gestetner California 09/05/95 9525560216 Original Equipment - --------------------------------------------------------------------------------------------------------------- Lessor: California 10/12/95 9528960403 Original Equipment General Electric Capital Corp. - --------------------------------------------------------------------------------------------------------------- Lessor: California 10/12/95 9528960412 Original Equipment General Electric Capital Corp. - ---------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------- SECURED PARTY JURISDICTION FILING DATE FILE NUMBER FILE TYPE COMMENTS - --------------------------------------------------------------------------------------------------------------- Berkshire- California 11/17/95 9532560866 Original 2.8 million letter Newburyport of credit Limited Partnership - --------------------------------------------------------------------------------------------------------------- Berkshire- California 12/28/95 96003c0137 Assignment 2.8 million letter Newburyport in full of credit assigned Limited to Shawmut Bank, Partnership N.A. Hartford, CT - --------------------------------------------------------------------------------------------------------------- General Electric California 01/23/96 9602460481 Original Equipment Capital Computer Leasing Corp. - --------------------------------------------------------------------------------------------------------------- General Electric California 02/18/97 9705060799 Original Equipment Capital Computer Leasing Corp. - --------------------------------------------------------------------------------------------------------------- General Electric California 05/08/97 9705060799 Amendment Serial numbers Capital Computer added to Leasing Corp. Equipment - --------------------------------------------------------------------------------------------------------------- Leasetec Systems California 05/08/97 ? 9712560143 Original Equipment Credit - --------------------------------------------------------------------------------------------------------------- Sumitomo Bank of California 8/18/97 9723160990 Original Broad Collateral California - --------------------------------------------------------------------------------------------------------------- Sumitomo Bank of Texas 8/18/97 171308 Original Broad Collateral California - --------------------------------------------------------------------------------------------------------------- Sumitomo Bank of Massachusetts 8/19/97 ? Original Broad Collateral California - --------------------------------------------------------------------------------------------------------------- Sumitomo Bank of Santa Clara 8/19/97 13819520 Original Fixture California County, California - --------------------------------------------------------------------------------------------------------------- Sumitomo Bank of Massachusetts 8/27/97 14286 Original California - --------------------------------------------------------------------------------------------------------------- Sumitomo Bank of Austin, Texas occurring, but California not of record yet - ---------------------------------------------------------------------------------------------------------------
-2- Exhibit A See Exhibit 4.4 to this Current Report on Form 8-K EXHIBIT B NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. GENUS, INC. WARRANT Dated ___________, 1998 Genus, Inc., a corporation organized and existing under the laws of the State of California (the "COMPANY"), hereby certifies that, for value received, ____________________________, or its registered assigns ("HOLDER"), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of _________ shares of Common Stock, no par value (the "COMMON STOCK"), of the Company (each such share, a "WARRANT SHARE" and all such shares, the "WARRANT SHARES") at an exercise price equal to $____ per share (as adjusted from time to time as provided in Section 8, the "EXERCISE PRICE"), at any time and from time to time from and after the date hereof and through and including ____________, 2001 (the "EXPIRATION DATE"), and subject to the following terms and conditions: 1. REGISTRATION OF WARRANT. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "WARRANT REGISTER"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary. 2. REGISTRATION OF TRANSFERS AND EXCHANGES. (a) The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "NEW WARRANT"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a holder of a Warrant. (b) This Warrant is exchangeable, upon the surrender hereof by the Holder to the office of the Company specified in or pursuant to Section 3(b) for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange. 3. DURATION AND EXERCISE OF WARRANTS. (a) This Warrant shall be exercisable by the registered Holder on any business day before 5:30 P.M., Eastern Standard Time, at any time and from time to time on or after the date hereof to and including the Expiration Date. At 5:30 P.M., Eastern Standard Time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. This Warrant may not be redeemed by the Company. (b) Subject to Sections 2(b), 6 and 11, upon surrender of this Warrant, with the Form of Election to Purchase attached hereto duly completed and signed, to the Company at its address for notice set forth in Section 11 and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, in lawful money of the United States of America, in cash or by certified or official bank check or checks, all as specified by the Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 3 business days after the Date of Exercise (as defined herein)) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends other than as required by the Purchase Agreement of even date herewith between the Holder, the Company and the other purchasers named therein (the "PURCHASE AGREEMENT"). Any person so designated by the Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant. A "DATE OF EXERCISE" means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the holder hereof to be purchased. (c) This Warrant shall be exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant. 4. PIGGYBACK REGISTRATION RIGHTS. If at any time during the term of this Warrant when there is not an effective registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder, the Company wishes to file any registration statement with -2- the Securities and Exchange Commission (other than registration statements of the Company filed on Form S-8 or Form S-4, each as promulgated under the Securities Act of 1933, as amended, pursuant to which the Company is registering securities pursuant to a Company employee benefit plan or pursuant to a merger, acquisition or similar transaction including supplements thereto, but not additionally filed registration statements in respect of such securities) the Company must provide, within not less than 20 days thereafter, notice to each of the Holder and Robinson Silverman Pearce Aronsohn & Berman LLP, attention Eric L. Cohen, of its intention to file such registration statement and must provide the Holder with the option to include any or all of the applicable Warrant Shares therein. The piggyback registration rights granted to the Holder pursuant to this Section shall continue until all of the Holder's Warrant Shares have been sold in accordance with an effective registration statement or upon the expiration of this Warrant. The Company will pay all registration expenses in connection therewith. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder, and the Company shall not be required to issue or cause to be issued or deliver or cause to be delivered the certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 6. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnity, if reasonably satisfactory to it. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable charges as the Company may prescribe. 7. RESERVATION OF WARRANT SHARES. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders (taking into account the adjustments and restrictions of Section 8). The Company covenants that all Warrant Shares that shall be so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 8. CERTAIN ADJUSTMENTS. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 8. Upon each such adjustment of the Exercise Price pursuant to this Section 8, the Holder shall thereafter -3- prior to the Expiration Date be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or on any other class of capital stock (and not the Common Stock) payable in shares of Common Stock, other than the dividends payable under the Purchase Agreement, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination, and shall apply to successive subdivisions and combinations. (b) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company in which the consideration therefor is equity or equity equivalent securities or any compulsory share exchange pursuant to which the Common Stock is converted into other securities or property, then the Holder shall have the right thereafter to exercise this Warrant only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property of the Company's business combination partner equal to the amount of Warrant Shares such Holder would have been entitled to had such Holder exercised this Warrant immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 8(b) upon any exercise following any such reclassification, consolidation, merger, sale, transfer or share exchange. (c) If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to holders of this Warrant) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Exercise Price determined as of the record date mentioned above, and of which the numerator shall be such Exercise Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by a nationally recognized or major regional investment banking firm or firm of -4- independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "APPRAISER") mutually selected in good faith by the holders of a majority in interest of the Warrants then outstanding and the Company. Any determination made by the Appraiser shall be final. (d) If at any time while this Warrant is outstanding, the Company shall issue or cause to be issued rights or warrants to acquire or otherwise sell or distribute shares of Common Stock to all holders of Common Stock for a consideration per share less than the Per Share Market Value (as defined in the Purchase Agreement) then in effect, then, forthwith upon such issue or sale, the Exercise Price shall be reduced to the price (calculated to the nearest cent) determined by dividing (i) an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the Exercise Price, and (B) the consideration, if any, received or receivable by the Company upon such issue or sale by (ii) the total number of shares of Common Stock outstanding immediately after such issue or sale. (e) For the purposes of this Section 8, the following clauses shall also be applicable: (i) RECORD DATE. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in securities convertible or exchangeable into shares of Common Stock, or (B) to subscribe for or purchase Common Stock or securities convertible or exchangeable into shares of Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (ii) TREASURY SHARES. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (g) If: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or -5- purchase any shares of capital stock of any class or of any rights; or (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall cause to be mailed to each Holder at their last addresses as they shall appear upon the Warrant Register, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up; PROVIDED, HOWEVER, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. 9. PAYMENT OF EXERCISE PRICE. The Holder may pay the Exercise Price in one of the following manners: (a) CASH EXERCISE. The Holder shall deliver immediately available funds; or (b) CASHLESS EXERCISE. The Holder shall surrender this Warrant to the Company together with a notice of cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: X = Y (A-B)/A where: X = the number of Warrant Shares to be issued to the Holder. Y = the number of Warrant Shares with respect to which this Warrant is being exercised. -6- A = the closing sale prices of the Common Stock for the Trading Day immediately prior to the Date of Exercise. B = the Exercise Price. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the issue date. 10. FRACTIONAL SHARES. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares which shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 10, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number. 11. NOTICES. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section, (ii) the business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iii) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (1) if to the Company, to Genus, Inc., 1139 Karlstad Drive, Sunnyvale, California 94089, or to Facsimile No.: (408) 747-7198 Attention: Chief Financial Officer, or (ii) if to the Holder, to the Holder at the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section 11. 12. WARRANT AGENT. (a) The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a new warrant agent. (b) Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. -7- 13. MISCELLANEOUS. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only in writing signed by the Company and the Holder. (b) Subject to Section 13(a), above, nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or cause under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. (c) This Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. (d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. [SIGNATURE PAGE FOLLOWS] -8- IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. GENUS, INC. By: --------------------------------------- Mary F. Bobel, Executive Vice President and Chief Financial Officer FORM OF ELECTION TO PURCHASE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To ___________________: In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase [___________] shares of Common Stock, no par value ("COMMON STOCK"), of Genus, Inc. and encloses herewith $________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER ----------------------------------- - -------------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to: - -------------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dated: , Name of Holder: -------------- ---- (Print) ------------------------- (By:) ------------------------- (Name:) (Title:) (Signature must conform in all respects to name of holder as specified on the face of the Warrant) [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock, no par value, of Genus, Inc. to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of ___________________ with full power of substitution in the premises. Dated: , - --------------- ---- --------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) --------------------------------------- Address of Transferee --------------------------------------- --------------------------------------- In the presence of: - -------------------------- Exhibit C See Exhibit 4.3 to this Current Report on Form 8-K EX-4.3 3 EXHIBIT 4.3 EXHIBIT 4.3 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of February 2, 1998, among Genus, Inc., a California corporation (the "COMPANY"), Southbrook International Investments, Ltd., a corporation existing under the laws of the British Virgin Islands ("SOUTHBROOK"), Westover Investments L.P., a Delaware limited partnership ("WESTOVER"), Montrose Investments, Ltd., a Cayman Islands exempt limited partnership ("MONTROSE"), Brown Simpson Strategic Growth Fund, L.P., a New York limited partnership ("BROWN SIMPSON LP"), Brown Simpson Strategic Growth Fund, Ltd., a Cayman Islands exempt company ("BROWN SIMPSON LIMITED") and CIBC Oppenheimer Corp.("CIBC"). Southbrook, Westover, Montrose, Brown Simpson LP and Brown Simpson Limited are each referred to herein as a "PURCHASER" and are collectively referred to herein as the "PURCHASERS." This Agreement is made pursuant to the Convertible Preferred Stock Purchase Agreement, dated as of the date hereof among the Company and the Purchasers (the "PURCHASE AGREEMENT"). The Company and the Purchasers hereby agree as follows: 1. DEFINITIONS Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "ADVICE" shall have meaning set forth in Section 3(o). "AFFILIATE" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "CONTROL," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "BUSINESS DAY" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the state of New York generally are authorized or required by law or other government actions to close. "CLOSING DATE" shall have the meaning set forth in the Purchase Agreement. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the Company's Common Stock, no par value. "EFFECTIVENESS DATE" means (i) with respect to the Registration Statement to be filed with respect to the Series A Shares, the 75th day following the Series A Closing Date and (ii) with respect to the Registration Statement to be filed with respect to the Series B Shares, the 75th day following the Series B Closing Date, or, if such day is not a Business Day, the Effectiveness Date shall be the next succeeding Business Day. "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FILING DATE" means (i) with respect to the shares of Common Stock issuable upon conversion of the Series A Shares, March 15, 1998 and (ii) with respect to the shares of Common Stock issuable upon conversion of the Series B Shares, the 30th day following the Series B Closing Date. "HOLDER" or "HOLDERS" means the holder or holders, as the case may be, from time to time of Registrable Securities. "INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c). "INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c). "LOSSES" shall have the meaning set forth in Section 5(a). "OPPENHEIMER WARRANT" means the warrant issued by the Company to CIBC on the Closing Date in connection with the transactions contemplated by the Purchase Agreement, which warrant is exercisable for 100,000 shares of the Company's Common Stock. "PERSON" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "PREFERRED STOCK" means the shares of 6% Series A and Series B Preferred Stock, no par value, of the Company issued to the Purchasers pursuant to the Purchase Agreement. "PROCEEDING" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "PROSPECTUS" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other -2- amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. "REGISTRABLE SECURITIES" means (a) with respect to the Registration Statement to be filed after the Series A Closing, the shares of Common Stock issuable upon (i) conversion of the Series A Shares (ii) exercise in full of the Series A Warrants and the Oppenheimer Warrants and (iii) payment of dividends in respect of the Series A Shares and (b) with respect to the Registration Statement to be filed after the Series B Closing, the shares of Common Stock issuable upon (i) conversion of the Series B Shares (ii) exercise of the Series B Warrants and (iii) payment of dividends in respect of the Series B Shares; PROVIDED, HOWEVER that in order to account for the fact that the number of shares of Common Stock that are issuable upon conversion of shares of Preferred Stock is determined in part upon the market price of the Common Stock at the time of conversion, Registrable Securities shall include (but not be limited to) a number of shares of Common Stock equal to no less than the sum of (1) 200% times the maximum number of shares of Common Stock into which the applicable series of Preferred Stock are convertible, assuming such conversion occurred on the particular Closing Date for such Series of Preferred Stock, (2) the number of shares of Common Stock issuable upon exercise of the Warrants then outstanding and (3) the number of shares of Common Stock issuable on payment of dividends on such Preferred Stock during the two-year period after the applicable Closing Date assuming all such dividends were paid in shares of Common Stock. Such registered shares of Common Stock shall be allocated among the Holders pro-rata based on the total number of Registrable Securities issued or issuable as of each date that a Registration Statement, as amended, relating to the resale of the Registrable Securities is declared effective by the Commission. Notwithstanding anything herein contained to the contrary, if the actual number of shares of Common Stock into which the shares of Preferred Stock are convertible exceeds twice the number of shares of Common Stock into which the particular series of Preferred Stock are convertible based upon a computation at a particular Closing Date, the term "Registrable Securities" shall be deemed to include such additional shares of Common Stock. The Company shall be required to file additional Registration Statements to the extent the actual number of shares of Common Stock into which the Preferred Stock is convertible (together with interest thereon) and Warrants are exercisable exceeds the number of shares of Common Stock initially registered in accordance with the immediately prior sentence. The Company shall have 15 Business Days to file such additional Registration Statement after notice of the requirement thereof, which the Holders may give at such time when the number of shares of Common Stock as are issuable upon conversion of Preferred Stock exceeds 185% of the number of shares of Common Stock into which Preferred Stock are convertible, assuming such conversion occurred on the Closing Date or the Filing Date (whichever yields a lower Conversion Price.) "REGISTRATION STATEMENT" means the registration statements and any additional registration statements contemplated by Section 2(a), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement. "RULE 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. -3- "RULE 158" means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "RULE 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SERIES A WARRANTS" means the warrants to purchase Common Stock issued to the Purchasers on the Series A Closing Date pursuant to the Purchase Agreement. "SERIES B WARRANTS" means the warrants to purchase Common Stock issued to the Purchasers on the Series B Closing Date pursuant to the Purchase Agreement. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SPECIAL COUNSEL" means one special counsel to the Holders, for which the Holders will be reimbursed by the Company pursuant to Section 4. "UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a registration in connection with which securities of the Company are sold to an underwriter for reoffering to the public pursuant to an effective registration statement. "WARRANTS" means the Series A Warrants, the Series B Warrants and the Oppenheimer Warrant. 2. SHELF REGISTRATION (a) On or prior to each applicable Filing Date, the Company shall prepare and file with the Commission a "Shelf" Registration Statement covering all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if otherwise directed by the Holders of a majority in interest of the applicable Registrable Securities in accordance herewith or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith). The Registration Statement shall state, to the extent permitted by Rule 416 under the Securities Act, that it also covers such indeterminate number of shares of Common Stock as may be required to effect (i) conversion of the Preferred Stock to prevent dilution resulting from stock splits, stock dividends or similar events, or by reason of changes in the Conversion Price in accordance with the terms of the Certificate of Determination and (ii) exercise of the Warrants in full to prevent dilution resulting from stock splits, stock dividends or similar events, or by reason of changes in the Exercise Price (as defined in the Warrants) in accordance with the terms of the Warrants. The Company shall (i) not permit any securities other than the Registrable Securities and those securities listed in Schedule 2.1(u) of the Disclosure Letter to be included in the Registration Statement and (ii) use its commercially reasonable efforts to cause the Registration Statement to be declared effective under the -4- Securities Act as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and to keep such Registration Statement continuously effective under the Securities Act until the date which is two years after the date that such Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by such Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144 as determined by the counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent to such effect (the "EFFECTIVENESS PERIOD"). If an additional Registration Statement is required to be filed because the actual number of shares of Common Stock into which the Preferred Stock is convertible plus shares issuable upon payment of dividends and exercise of the Warrants exceeds the number of shares of Common Stock initially registered in respect of any particular series of Preferred Stock based upon the computation on a particular Closing Date, the Company shall, as promptly as reasonably possible, but no later than 20 Business Days to file such additional Registration Statement, and the Company shall use its best efforts to cause such additional Registration Statement to be declared effective by the Commission as soon as possible. (b) If the Holders of a majority of the Registrable Securities so elect, an offering of Registrable Securities pursuant to the Registration Statement may be effected on no more than two occasions in the form of an Underwritten Offering. In such event, and, if the managing underwriters advise the Company and such Holders in writing that in their opinion the amount of Registrable Securities proposed to be sold in such Underwritten Offering exceeds the amount of Registrable Securities which can be sold in such Underwritten Offering, the Registrable Securities of CIBC shall first be excluded from such Underwritten Offering and then if in the opinion of such managing underwriters the amount of Registrable Securities proposed to be sold in such Underwritten Offering still exceeds the amount of Registrable Securities which can be sold in such Underwritten Offering there shall be included in such Underwritten Offering the amount of such Registrable Securities which in the opinion of such managing underwriters can be sold, and such amount shall be allocated pro rata among the Holders (excluding CIBC) proposing to sell Registrable Securities in such Underwritten Offering. (c) If any of the Registrable Securities are to be sold in an Underwritten Offering, the investment banker in interest that will administer the offering will be selected by the Holders of a majority of the Registrable Securities included in such offering provided that the Company shall consent to the inclusion of such investment banker, which consent shall not be unreasonably withheld. No Holder may participate in any Underwritten Offering hereunder unless such Holder (i) agrees to sell its Registrable Securities on the basis provided in any underwriting agreements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such arrangements. 3. REGISTRATION PROCEDURES In connection with the Company's registration obligations hereunder, the Company shall: (a) Prepare and file with the Commission on or prior to each applicable Filing Date, a Registration Statement on Form S-3 (or if the Company is not then eligible to register for resale the -5- Registrable Securities on Form S-3 such registration shall be on another appropriate form in accordance herewith, or, in connection with an Underwritten Offering hereunder, such other form agreed to by the Company and by a majority-in-interest of Holders of Registrable Securities) in accordance with the method or methods of distribution thereof as specified by the Holders (except if otherwise directed by the Holders), and cause the Registration Statement to become effective and remain effective as provided herein; PROVIDED, HOWEVER, that not less than five (5) Business Days prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated therein by reference), the Company shall, if reasonably practicable (i) furnish to the Holders, their Special Counsel and any managing underwriters, copies of all such documents proposed to be filed, which documents (other than those incorporated by reference) will be subject to the review of such Holders, their Special Counsel and such managing underwriters, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to such Holders and such underwriters, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities, their Special Counsel, or any managing underwriters, shall reasonably object in writing within three (3) Business Days of their receipt thereof. (b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Holders of Registrable Securities to be sold, their Special Counsel and any managing underwriters as promptly as reasonably possible (and, in the case of (i)(A) below, not less than five (5) days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Business Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the -6- issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) if at any time any of the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (e) If requested by any managing underwriter or the Holders of a majority in interest of the Registrable Securities to be sold in connection with an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, that the Company shall not be required to take any action pursuant to this Section 3(e) that would, in the opinion of counsel for the Company, violate applicable law or be materially detrimental to the business prospects of the Company. (f) Furnish to each Holder, their Special Counsel and any managing underwriters, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) Promptly deliver to each Holder, their Special Counsel, and any underwriters, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders and any underwriters in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. -7- (h) Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling Holders, any underwriters and their Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder or underwriter requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; PROVIDED, HOWEVER, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (i) Cooperate with the Holders and any managing underwriters to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such managing underwriters or Holders may request at least two Business Days prior to any sale of Registrable Securities. (j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be listed on the Nasdaq Stock Market and any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed as and when required pursuant to the Purchase Agreement. (l) Enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in Underwritten Offerings) and take all such other actions in connection therewith (including those reasonably requested by any managing underwriters and the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities, and whether or not an underwriting agreement is entered into, (i) make such representations and warranties to such Holders and such underwriters as are customarily made by issuers to underwriters in underwritten public offerings, and confirm the same if and when requested; (ii) in the case of an Underwritten Offering obtain and deliver copies thereof to the managing underwriters, if any, of opinions of counsel to the Company and updates thereof addressed to each such underwriter, in form, scope and substance reasonably satisfactory to any such managing underwriters and Special Counsel to the selling Holders covering the matters customarily covered in opinions requested in Underwritten -8- Offerings and such other matters as may be reasonably requested by such Special Counsel and underwriters; (iii) immediately prior to the effectiveness of the Registration Statement, and, in the case of an Underwritten Offering, at the time of delivery of any Registrable Securities sold pursuant thereto, use its best reasonable efforts to obtain and deliver copies to the Holders and the managing underwriters, if any, of "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to the Company in form and substance as are customary in connection with Underwritten Offerings; (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the selling Holders and the underwriters, if any, than those set forth in Section 6 (or such other provisions and procedures acceptable to the managing underwriters, if any, and holders of a majority of Registrable Securities participating in such Underwritten Offering); and (v) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold, their Special Counsel and any managing underwriters to evidence the continued validity of the representations and warranties made pursuant to clause 3(l)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. (m) Make available for inspection by the selling Holders, any representative of such Holders, any underwriter participating in any disposition of Registrable Securities, and any attorney or accountant retained by such selling Holders or underwriters, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors, agents and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Holder, representative, underwriter, attorney or accountant in connection with the Registration Statement; PROVIDED, HOWEVER, that any information that is determined in good faith by the Company in writing to be of a confidential nature at the time of delivery of such information shall be kept confidential by such Persons, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities; (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law; (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person; or (iv) such information becomes available to such Person from a source other than the Company and such source is not known by such Person to be bound by a confidentiality agreement with the Company. (n) Comply in all material respects with all applicable rules and regulations of the Commission. (o) The Company may require each selling Holder to furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. -9- If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder covenants and agrees that (i) it will not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing (the "ADVICE") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. (p) If (a) there is material non-public information regarding the Company which the Company's Board of Directors reasonably determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (b) there is a significant business opportunity (including but not limited to the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Company's Board of Directors reasonably determines not to be in the Company's best interest to disclose, then the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed 20 consecutive days, provided that the Company may not postpone or suspend its obligation under this Section 3(p) for more than 60 days in the aggregate during any 12 month period; provided, however, that no such postponement or suspension shall be permitted for consecutive 20 day periods, arising out of the same set of facts, circumstances or transactions. 4. REGISTRATION EXPENSES (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company, except as and to the extent specified in Section 4(b), shall be borne by the Company whether or not pursuant to an Underwritten Offering and whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) -10- with respect to filings required to be made with the Nasdaq Stock Market and each other securities exchange or market on which Registrable Securities are required hereunder to be listed and (B) in compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Holders in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the managing underwriters, if any, or the Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and Special Counsel for the Holders, in the case of the Special Counsel, to a maximum amount of $10,000, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. (b) If the Holders require an Underwritten Offering pursuant to the terms hereof, the Company shall be responsible for all costs, fees and expenses in connection therewith, except for the fees and disbursements of the Underwriters (including any underwriting commissions and discounts) and their legal counsel and accountants (which shall be borne by the Holders). Therefore, in such circumstances, the Holder shall bear the expenses of the fees and disbursements of any legal counsel or accounting firm retained by the underwriters in connection with such Underwritten Offering and the costs of any determination (but not filing) by the underwriters of the eligibility of the Registrable Securities for investment under the applicable state securities laws. By way of illustration which is not intended to diminish from the provisions of Section 4(a), the Holders shall not be responsible for, and the Company shall be required to pay the fees or disbursements incurred by the Company (including by its legal counsel and accountants) in connection with, the preparation and filing of a Registration Statement and related Prospectus for such offering, the maintenance of such Registration Statement in accordance with the terms hereof, the listing of the Registrable Securities in accordance with the requirements hereof, and printing expenses incurred to comply with the requirements hereof. 5. INDEMNIFICATION (a) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents (including any underwriters retained by such Holder in connection with the offer and sale of Registrable Securities), brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and -11- employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (in the case of any Prospectus or form of Prospectus or supplement thereto, in light of the circumstances under which they were made), except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, which information was reasonably relied on by the Company for use therein or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, the directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion therein the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus, or in any amendment or supplement thereto. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation; PROVIDED, HOWEVER, that no such limitation shall apply if such Losses result solely from the willful misconduct of such Holder. (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of -12- counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within 10 Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; PROVIDED, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (d) CONTRIBUTION. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or -13- made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms; PROVIDED, HOWEVER, that no such limitation shall apply if such Losses result solely from the willful misconduct of such Holder. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by PRO RATA allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 6. RULE 144 As long as any Holder owns Shares, Warrants or Underlying Shares (as such term is defined in the Purchase Agreement), the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any Holder owns Shares, Warrants or Underlying Shares prior to the date on which all Holders may resell all of its Shares, Warrants or Underlying Shares without volume restrictions pursuant to Rule 144(k) promulgated under the Securities Act (as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent for the benefit of and enforceable by any holder thereof), if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including providing any legal opinions referred to in the Purchase -14- Agreement. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. 7. MISCELLANEOUS (a) REMEDIES. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its subsidiaries has, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as disclosed in Schedule 2.1(u) of the Disclosure Letter, neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person. Without limiting the generality of the foregoing, without the written consent of the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Holders set forth herein, and are not otherwise in conflict or inconsistent with the provisions of this Agreement. (c) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto or as disclosed in Schedule 2.1(u) of the Disclosure Letter) may include securities of the Company in the Registration Statement other than the Registrable Securities or as disclosed in Schedule 2.1(u) of the Disclosure Letter, and the Company shall not after the date hereof enter into any agreement providing any such right to any of its security holders. (d) PIGGY-BACK REGISTRATIONS. If at any time when there is not an effective Registration Statement covering Underlying Shares, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each holder of Registrable Securities written notice of such determination and, if within twenty (20) days after receipt of such notice, any such holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the Commission. In the case of an -15- underwritten public offering, if the managing underwriter(s) or underwriter(s) should reasonably object to the inclusion of the Registrable Securities in such registration statement, then if the Company after consultation with the Underwriter's Representative should reasonably determine that the inclusion of such Registrable Securities, would materially adversely affect the offering contemplated in such registration statement, and based on such determination recommends inclusion in such registration statement of fewer or none of the Registrable Securities of the Holders, then the Registrable Securities of CIBC shall first be excluded from such registration statement and if additional Registrable Securities must still be excluded from such registration statement then (x) the number of Registrable Securities of the Holders (excluding CIBC) included in such registration statement shall be reduced pro-rata among such Holders (based upon the number of Registrable Securities requested to be included in the registration), if the Company after consultation with the underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y) none of the Registrable Securities of the Holders shall be included in such registration statement, if the Company after consultation with the underwriter(s) recommends the inclusion of none of such Registrable Securities; PROVIDED, HOWEVER, that if Securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of Registrable Securities intended to be offered by the Holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company). (e) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least two-thirds of the then outstanding Registrable Securities; PROVIDED, HOWEVER, that, for the purposes of this sentence, Registrable Securities that are owned, directly or indirectly, by the Company, or an Affiliate of the Company are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; PROVIDED, HOWEVER, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (f) NOTICES. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 8:00 p.m. (Eastern Standard Time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in the Purchase Agreement later than 8:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given to each Holder at its address set forth under its name on SCHEDULE 1 attached hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. Copies of notices to any -16- Holder shall be sent to Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, NY 10104, Attn: Kenneth L. Henderson, Esq., fax: (212) 541-4630 and copies of all notices to the Company shall be sent to Wilson Sonsini Goodrich & Rosati, a professional corporation, Attn: Andrew J. Hirsch, Esq., fax: (650) 354-4210. (g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Purchaser may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. (h) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder to any Affiliate of such Holder, any other Holder or Affiliate of any other Holder and up to four other assignees of all or a portion of the shares of Preferred Stock, the Warrants or the Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (i) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (j) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. (k) CUMULATIVE REMEDIES. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (l) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and -17- shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (m) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (n) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than any Holder or transferees or successors or assigns thereof if such Holder is deemed to be an Affiliate solely by reason of its holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE TO FOLLOW] -18- IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
GENUS, INC. SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD By: /s/ MARY F. BOBEL By: /s/ KENNETH L. HENDERSON ------------------------------------ ---------------------------------------------- Name: Mary F. Bobel Name: Kenneth L. Henderson Title: Executive Vice President Title: Attorney-in-fact and Chief Financial Officer WESTOVER INVESTMENTS L.P. By: HBK Investments L.P., as investment manager By: /s/ DAVID C. HALEY ---------------------------------------------- Name: David C. Haley Title: Authorized Agent MONTROSE INVESTMENTS, LTD. By: HBK Investments L.P., as investment manager By: /s/ DAVID C. HALEY ---------------------------------------------- Name: David C. Haley Title: Authorized Agent BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: /s/ EVAN M. LEVINE ---------------------------------------------- Name: Evan M. Levine Title: Principal BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: /s/ EVAN M. LEVINE ---------------------------------------------- Name: Evan M. Levine Title: Principal CIBC OPPENHEIMER CORP. By: /s/ MATTHEW J. MARYLES ---------------------------------------------- Name: Matthew J. Maryles Title: Managing Director
SCHEDULE 1 COMPANY: GENUS, INC. 1139 Karlstad Drive Sunnyvale, California 94089 Attn: Mary Bobel Fax: (408) 747-7140 PURCHASERS: SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD. c/o Trippoak Advisors, Inc. 630 Fifth Avenue, Suite 2000 New York, NY 10111 Attn: Robert L. Miller Fax: (212) 332-3256 WESTOVER INVESTMENTS L.P. 777 Main Street, Suite 2750 Fort Worth, Texas 76102 Attn: Will Rose Fax: (817) 870-6190 MONTROSE INVESTMENTS, LTD. 777 Main Street, Suite 2750 Fort Worth, Texas 76102 Attn: Will Rose Fax: (817) 870-6190 BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. 152 West 57th street, 40th Floor New York, New York 10019 Attn: Mitchell Kaye Fax: (212) 247-1329 BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. 152 West 57th street, 40th Floor New York, New York 10019 Attn: Mitchell Kaye Fax: (212) 247-1329 CIBC OPPENHEIMER CORP. 200 Liberty Street, 7th Floor New York, New York 10281 Attn: Matthew J. Maryles Fax: (212) 667-5785 EX-4.4 4 EXHIBIT 4.4 EXHIBIT 4.4 CERTIFICATE OF DETERMINATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A CONVERTIBLE PREFERRED STOCK OF GENUS, INC. The undersigned, Mary F. Bobel and Mario M. Rosati, do hereby certify that: H. They are the duly elected and acting Executive Vice President and Chief Financial Officer, and Secretary, respectively, of Genus, Inc., a California corporation (the "Corporation"). I. Pursuant to the authority conferred upon the Board of Directors by the Restated Articles of Incorporation of the Corporation, the said Board of Directors on January 26, 1998, adopted the following resolution creating a series of 100,000 shares of Preferred Stock designated as Series A Convertible Preferred Stock: "RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation by the Restated Articles of Incorporation, the Board of Directors does hereby provide for the issue of a series of Preferred Stock of the Corporation to be designated "Series A Convertible Preferred Stock" initially consisting of 100,000 shares, and to the extent that the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of the Series A Convertible Preferred Stock are not stated and expressed in the Restated Articles of Incorporation, does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions thereof, as follows (all terms used herein which are defined in the Restated Articles of Incorporation shall be deemed to have the meanings provided therein): Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred stock shall be designated as 6% Series A Convertible Preferred Stock (the "PREFERRED STOCK"), and the number of shares so designated shall be 100,000. Each share of Preferred Stock shall have no par value and a stated value of $50.00 per share (the "STATED VALUE"). Section 2. DIVIDENDS. (a) Each Holder of Preferred Stock ("HOLDER") shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, and the Company shall pay, cumulative dividends at the rate per share (as a percentage of the Stated Value per share) equal to 6% per annum, payable, in cash or shares of Common Stock (as defined in Section 8) at (subject to the terms and conditions set fort herein) the option of the Company. Dividends on the Preferred Stock shall be due and payable on each yearly anniversary of the Original Issue Date (each a "DIVIDEND PAYMENT DATE"), and any dividends not paid on any Dividend Payment Date shall accrue and shall be due and payable upon conversion of the Preferred Stock. No dividends shall be due and payable for any partial year period for which the Dividend Payment Date has not yet occurred. A party that holds shares of Preferred Stock on a Dividend Payment Date will be entitled to receive such dividend payment and any other accrued and unpaid dividends which accrued prior to such Dividend Payment Date, without regard to any sale or disposition of such Preferred Stock subsequent to the applicable record date. All overdue accrued and unpaid dividends and other amounts due herewith shall entail a late fee at the rate of 15% per annum (to accrue daily, from the date such dividend is due hereunder through and including the date of payment). Except as otherwise provided herein, if at any time the Company pays less than the total amount of dividends then accrued on account of the Preferred Stock or on account of the Company's 6% Series B Convertible Preferred Stock (which would be the next series of preferred stock authorized by the Board of Directors pursuant to the proper filing of a Certificate of Determination setting forth the rights, preferences and privileges of such series) (the "SERIES B PREFERRED STOCK"), if issued, which may be purchased pursuant to the Purchase Agreement, such payment shall be distributed ratably among the Holders and the holders of the Series B Preferred Stock (the "PREFERRED HOLDERS") based upon the number of shares held by each Preferred Holder. The Company shall provide the Holders notice of its intention to pay dividends in cash or shares of Common Stock not less than 10 Trading Days prior to the Dividend Payment Date for so long as shares of Preferred Stock are outstanding. If dividends are paid in shares of Common Stock, the number of shares of Common Stock payable as such dividend to each Holder shall be equal to the cash amount of such dividend payable to such Holder on such Dividend Payment Date divided by the closing bid price of the Common Stock on the Trading Day prior to such Dividend Payment Date ("DIVIDEND CONVERSION PRICE"), further provided that the Dividend Conversion Price shall not be less than $3.47. (b) Notwithstanding anything to the contrary contained herein, the Company may not issue shares of Common Stock in payment of dividends (and must deliver cash in respect thereof) on the Preferred Stock if: (i) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes is insufficient to pay such dividends in shares of Common Stock; (ii) the shares of Common Stock to be issued in respect of such dividends are not registered for resale pursuant to an effective registration statement that names the recipient of such dividend as a selling stockholder thereunder (unless such registration statement is not declared effective solely as a result of the actions of the recipient of such dividend or if such recipient has failed to provide the Company with the necessary selling shareholder information to be included in such registration statement) and may not be sold without volume restrictions pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the "SECURITIES ACT"), as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent in the form and substance acceptable to the Holder; (iii) the shares of Common Stock to be issued in respect of such dividends are not listed on the Nasdaq Stock Market or any other exchange or quotation system on which the Common Stock is then listed for trading; (iv) the Company has failed to timely satisfy its obligations pursuant to any Conversion Notice (as defined in Section 5(a)(ii)). (c) So long as any Preferred Stock shall remain outstanding, neither the Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities (as defined in Section 8), nor shall the Company directly or indirectly pay or declare any dividend or make any distribution (other than a dividend or distribution described in Section 5) upon, nor shall any distribution be made in respect of, any Junior Securities, nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Preferred Stock, except for repurchases effected by the Company on the open market, pursuant to a direct stock purchase plan. -2- Section 3. VOTING RIGHTS. (a) Except as otherwise provided herein and as otherwise required by law, the Preferred Stock shall have no voting rights. However, so long as any shares of Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the Holders of all of the shares of the Preferred Stock then outstanding,(a) alter or change adversely the powers, preferences or rights given to the Preferred Stock, (b) alter or amend this Certificate of Determination, (c) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 4) or otherwise senior to or pari passu with the Preferred Stock, except for any series of Preferred Stock issued and sold in accordance with the Purchase Agreement, (d) amend its Articles of Incorporation, bylaws or other charter documents so as to affect adversely any rights of any Holders, (e) increase the authorized number of shares of Preferred Stock and (f) enter into any agreement with respect to the foregoing. (b)(i) If the Company shall have defaulted on any of its conversion obligations, registration obligations or payment obligations hereunder, and such default has continued for 180 days, then on the 181st day of the continuance of such default, without the requirement of any additional action by the Company's Board of Directors or stockholders, the fixed number of directors constituting the Company's Board of Directors shall be automatically increased, pursuant to the authority of the Board of Directors to adjust the fixed number of directors within the authorized minimum and maximum numbers as stated in the Company's Bylaws, by one directorship and the Preferred Holders, voting together as a single class, shall be entitled to elect the director to fill the resulting vacancy on the Company's Board of Directors. At elections for such director, each Preferred Holder shall be entitled to one vote for each share of Preferred Stock or Series B Preferred Stock held. Such right to vote as a single class to elect directors shall, when vested, continue until all defaults which triggered such right have been completely cured, and when so cured such right to elect such director separately as a separate class shall cease. (ii) Whenever such voting right shall have vested, such right may be exercised initially either, at a special meeting of the Preferred Holders called as hereinafter provided or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at such meetings or by the written consent of such holders pursuant to the California Corporations Code. (iii) At any time when the voting right granted by this Section 3(b) shall have vested in the Preferred Holders entitled to vote thereon, and if such right shall not already have been initially exercised, an officer of the Corporation shall, upon written request of Preferred Holders of record of 10% in the aggregate, of shares of Preferred Stock and Series B Preferred Stock then outstanding, addressed to the Chief Financial Officer of the Corporation, call a special meeting of Preferred Holders. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, if none, at a place designated by the Chief Financial Officer of the Corporation. If notice of such meeting is not mailed within 30 days after such written request is mailed to the Chief Financial Officer of the Corporation, by registered mail, addressed to the Chief Financial Officer of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the Preferred Holders of record of 10% of the shares of the Preferred Stock and the Series B Preferred Stock then outstanding may designate in writing any person to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided in this paragraph 3(b)(iii). Any Preferred Holder that would be entitled to vote at such meeting shall have access to the stock record books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this paragraph 3(b)(iii). Notwithstanding the provisions of this paragraph, however, no such special meeting shall be called or held during a period within 30 days immediately preceding the date fixed for the Corporation's next annual meeting of stockholders. -3- (iv) The directors elected pursuant to this paragraph 3(b) shall serve until the next annual meeting or until their respective successors shall be elected and shall qualify, unless earlier terminated as set forth below. Any director elected by the Preferred Holders may be removed by, and shall not be removed otherwise than by, the vote of the Preferred Holders of a majority of the outstanding shares of the Preferred Stock and the Series B Preferred Stock who were entitled to participate in such election of directors, voting as a special class, at a meeting called for such purpose or by written consent as permitted by law and the Articles of Incorporation and By-laws of the Corporation. If the office of the director elected by the Preferred Holders, voting as a class, becomes vacant by reason of death, resignation, retirement, disqualification or removal from office or otherwise, the Preferred Holders in accordance with the above procedures, voting as a class, shall elect a successor director who shall hold office for the unexpired term in respect of which such vacancy occurred. Upon any termination of the right of the Preferred Holders to vote for directors as herein provided, the term of office of all directors then in office elected by the Preferred Holders, voting as a class, shall terminate immediately. Whenever the terms of office of the directors elected by the Preferred Holders shall have expired, the number of directors shall be such number as may be provided for pursuant to the By-laws of the Corporation irrespective of any increase made pursuant to the provisions of this Section 3(b). (v) So long as any shares of Preferred Stock or Series B Preferred Stock are outstanding, the By-laws shall contain no provisions that would restrict the exercise, by the Preferred Holders of the right to elect directors under the circumstances provided in Section 3(b)(i) above. Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "LIQUIDATION"), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Preferred Stock an amount equal to the Stated Value plus all due but unpaid dividends per share, whether declared or not, before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders of Preferred Stock shall be distributed among the Preferred Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or a consolidation or merger of the Company with or into any other company or companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of Section 5. The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record Holder of Preferred Stock. Section 5. CONVERSION. (a)(i) Each share of Preferred Stock shall be convertible into shares of Common Stock (subject to reduction pursuant to Section 5(a)(iii) and Section 3.16 of the Purchase Agreement) at the Conversion Ratio (as defined in Section 8) at the option of the Holder in whole or in part at any time after the Original Issue Date. The Holders shall effect conversions by surrendering the certificate or certificates representing the shares of Preferred Stock to be converted to the Company, or its agent, together with the form of conversion notice attached hereto as EXHIBIT A (the "HOLDER CONVERSION NOTICE"). Each Holder Conversion Notice shall specify the number of shares of Preferred Stock to be converted and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Holder Conversion Notice by facsimile (the "HOLDER CONVERSION DATE"). If no Holder Conversion Date is specified in a Holder Conversion Notice, the Holder Conversion Date shall be the date that the Holder Conversion Notice is deemed delivered pursuant to Section 5(h). Subject to Sections 5(b) and 5(a)(iii) hereof, each Holder Conversion Notice, once given, shall be irrevocable. If the Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates tendered by the Holder with the Holder -4- Conversion Notice, or if a conversion hereunder cannot be effected in full for any reason, the Company shall promptly deliver to such Holder (in the manner and within the time set forth in Section 5(b)) a certificate for such number of shares as have not been converted. (ii) On the second anniversary of the Original Issue Date or thereafter, the Company may require the conversion of all, but not less than all, of the then outstanding and unconverted shares of Preferred Stock with such conversion being effectuated at the Conversion Price then in effect (subject to reduction pursuant to Section 5(a)(iii)) by delivering to the Holder of such shares to be converted a notice in the form attached hereto as EXHIBIT B (the "COMPANY CONVERSION NOTICE"), PROVIDED, that, no such conversion is permitted unless at the time of the delivery of the Company Conversion Notice and on the Company Conversion Date (as defined below), (a) the Company shall have complied in all material respects with its obligations under the Registration Rights Agreement, (b) the Company was at the time of the issuance of the Preferred Stock and the Company is at the time of the conversion of the Preferred Stock a "listed corporation" as defined in subdivision (d) of Section 301.5 of the California Corporations Code, (c) the shares of Common Stock issuable upon such conversion are listed for trading on the Nasdaq Stock Market or any other exchange or quotation system on which the Common Stock is then listed for trading as such is defined by subdivision (d) of Section 301.5 of the California Corporations Code, (d) the Company is in compliance with all of its obligations under this Certificate of Determination, the Purchase Agreement and the Registration Rights Agreement, and (e) the closing bid price of the Common Stock for at least 20 of the 30 Trading Days immediately preceding the date of the Company Conversion Notice shall have been at least 150% of the Conversion Price on the Original Issue Date. Each Company Conversion Notice shall specify the date on which such conversion is to be effected, which date may not be prior to the day after the Company delivers such Company Conversion Notice by facsimile or later than 10 Trading Days subsequent to such delivery (the "COMPANY CONVERSION DATE"). If no Company Conversion Date is specified in a Company Conversion Notice, the Company Conversion Date shall be the date that the Company Conversion Notice is deemed delivered pursuant to Section 5(h). A Holder Conversion Date and a Company Conversion Date are sometimes referred to herein as the "CONVERSION DATE" and a Holder Conversion Notice and a Company Conversion Notice are sometimes referred to as a "CONVERSION NOTICE." Any conversion pursuant to this Section 5(a)(ii) shall be subject to Section 5(b) with respect to consequences of the Company's failure to deliver shares of Common Stock in respect of a conversion under this Section. If a conversion hereunder cannot be effected in full for any reason, the Company shall promptly deliver to such tendering Holder (in the manner and within the time set forth in Section 5(b)) a certificate for such number of shares of Preferred Stock as have not been converted. (iii) If on the Conversion Date applicable to any conversion, (A) the Common Stock is then listed for trading on the Nasdaq Stock Market, the American Stock Exchange or the Nasdaq SmallCap Market, (B) the Conversion Price then in effect is such that the aggregate number of shares of Common Stock that would then be issuable upon conversion of all outstanding shares of Preferred Stock and Series B Preferred Stock, if issued, together with any shares of Common Stock previously issued upon conversion of Preferred Stock or Series B Preferred Stock, if issued, and in respect of payment of dividends hereunder or thereunder and shares of Common Stock issuable upon the exercise of Warrants, would equal or exceed 19.999% of the number of shares of Common Stock outstanding on the Original Issue Date (the "ISSUABLE MAXIMUM"), and (C) the Company has not previously obtained Shareholder Approval (as defined below), then the Company shall deliver to the Holder seeking conversion a notice within two Trading Days of receiving such conversion request of the Company's intention to either (1) issue to any Holder so requesting conversion of Preferred Stock its pro rata portion of the Issuable Maximum in the same ratio that the number of shares of Preferred Stock held by any such Holder bears to all shares of Preferred Stock then outstanding and, with respect to any shares of Common Stock that otherwise would have been issuable to such Holder in respect of the Conversion Notice at issue or in respect of payment of dividends hereunder in excess of the Issuable Maximum, the Holder may require the Company to, as promptly as possible, but in no event later than 60 days after notice from such Holder convene a meeting of the holders of the Common Stock and use its best efforts to obtain the Shareholder Approval; provided that in no event shall such meeting be required to occur prior to May 31, 1998, or (2) redeem as -5- soon as reasonably possible, but in any event within seven days of such notice, from funds legally available therefor at the time of such redemption, the balance of the Preferred Stock subject to such Conversion Notice at a price per share equal to the product of (i) the average Per Share Market Value for the five (5) Trading Days immediately preceding (x) the Conversion Date or (y) the date of payment in full by the Company of such redemption price, whichever is greater, and (ii) the Conversion Ratio calculated on the Conversion Date; PROVIDED, HOWEVER, that if the Holder has requested that the Company obtain Shareholder Approval under clause (1) above and the Company fails for any reason to obtain such Shareholder Approval within the time period set forth in clause (1) above, the Company shall be obligated to redeem as promptly as reasonably possible but in any event within seven days of such failure the Preferred Stock not converted as a result of the provisions of this Section in accordance with the provisions of clause (2) above. If the Company is obligated to redeem shares of Preferred Stock pursuant to this Section and the Company fails for any reason to pay the redemption price within the time periods set forth above, the Company will pay a late fee on such redemption price at a rate of 15% per annum to the converting Holder of Preferred Stock, accruing from the Conversion Date until the redemption price plus any accrued late fees thereon is paid in full. The entire redemption price, including late fees thereon, shall be paid in cash. "SHAREHOLDER APPROVAL" means the approval by a majority of the total votes cast on the proposal, in person or by proxy, at a meeting of the shareholders of the Company held in accordance with the Company's Articles of Incorporation and by-laws, of the issuance by the Company of shares of Common Stock exceeding the Issuable Maximum as a consequence of the conversion of Preferred Stock and exercise of the Warrants into Common Stock at a price less than the greater of the book or market value on the Original Issue Date as and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock Market or Rule 713 of the American Stock Exchange (or any successor or replacement provision thereof), as applicable. (b) Not later than three Trading Days after any Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1(b) of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Preferred Stock (subject to reduction pursuant to Section 5(a)(iii) and Section 3.16 of the Purchase Agreement), (ii) one or more certificates representing the number of shares of Preferred Stock not converted, (iii) a bank check in the amount of accrued and unpaid dividends, if any (if the Company has elected to pay accrued dividends in cash) and (iv) if the Company has elected to pay accrued dividends in shares of Common Stock, certificates, which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1 (b) of the Purchase Agreement), representing such number of Shares of Common Stock as equals such dividend divided by the Conversion Price on the Dividend Payment Date; PROVIDED, HOWEVER, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any shares of Preferred Stock until certificates evidencing such shares of Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Preferred Stock or Common Stock, or the Holder of such Preferred Stock notifies the Company that such certificates have been lost, stolen or destroyed and provides a bond (or other adequate security) reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. The Company shall, upon request of the Holder, use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions, if available. If in the case of any Conversion Notice such certificate or certificates, including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion. If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section, including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, on or prior to the third Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a -6- penalty, $5,000 for each day after such third Trading Day until such certificates are delivered. If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section prior to the 10th day after the Conversion Date, the Company shall, at the Holder's option (i) redeem, from funds legally available therefor at the time of such redemption, such number of shares of Preferred Stock then held by such Holder, as requested by such Holder, and (ii) pay all accrued but unpaid dividends on account of the Preferred Stock for which the Company shall have failed to issue Common Stock certificates hereunder, in cash. The redemption price shall be equal to the sum of (A) the aggregate of all accrued but unpaid dividends, plus (B) the number of shares of Preferred Stock then held by such Holder multiplied by (1) the average Per Share Market Value for the five (5) Trading Days immediately preceding (x) the Conversion Date or (y) the date of payment in full by the Company of such prepayment price, whichever is greater, multiplied by, (2) the Conversion Ratio calculated on the Conversion Date. If the Holder has requested that the Company redeem shares of Preferred Stock pursuant to this Section and the Company fails for any reason to pay the redemption price under (2) above within seven days after such notice is deemed delivered pursuant to Section 5(i), the Company will pay a late fee on the redemption price at a rate of 15% per annum, in cash to such Holder, accruing from such seventh day until the redemption price and any accrued late fees thereon is paid in full. Nothing herein shall limit a Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein (including, without limitation, damages relating to any purchase of shares of Common Stock by such Holder to make delivery on a sale effected in anticipation of receiving certificates representing shares of Common Stock upon conversion, such damages to be in an amount equal to (A) the aggregate amount paid by such Holder for the shares of Common Stock so purchased MINUS (B) the aggregate amount of net proceeds, if any, received by such Holder from the sale of the shares of Common Stock issued by the Company pursuant to such conversion), and such Holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or injunctive relief). (c)(i) The conversion price for each share of Preferred Stock (the "CONVERSION PRICE") in effect on any Conversion Date shall be the lesser of (a) 110% of the Per Share Market Value for the Trading Day immediately preceding the Original Issue Date (the "INITIAL CONVERSION PRICE") provided that the Initial Conversion Price shall not be less than $3.47 or (b) 82% of the average of fifteen (15) closing bid prices of the Common Stock on the Nasdaq Stock Market or other market or exchange on which the Common Stock is then listed or traded, during the forty five (45) Trading Days prior to the date of the applicable Conversion Notice, which fifteen closing bid prices shall be chosen by the Holder converting such shares of Preferred Stock; PROVIDED, HOWEVER, that, (a) if the Underlying Shares Registration Statement (as defined in the Registration Rights Agreement) is not filed on or prior to March 15, 1998, or (b) the Company fails to file with the Commission a request for acceleration in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as amended, within five (5) days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that an Underlying Shares Registration Statement will not be "reviewed," or not subject to further review, or (c) if the Underlying Shares Registration Statement is not declared effective by the Commission on or prior to the 90th day after the Original Issue Date, or (d) if such Underlying Shares Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective as to all Registrable Securities (as such term is defined in the Registration Rights Agreement) at any time prior to the expiration of the "EFFECTIVENESS PERIOD" (as such term as defined in the Registration Rights Agreement), without being succeeded within 10 Trading Days by a subsequent Underlying Shares Registration Statement filed with and declared effective by the Commission, or (e) if trading in the Common Stock shall be suspended for more than three (3) consecutive Trading Days or five (5) Trading Days in the aggregate, or (f) if the conversion rights of the Holders are suspended for any reason, or (g) if the Company breaches in a material respect any covenant or other material term or condition to this Agreement, the Purchase Agreement (other than a representation or warranty contained therein), the Warrants, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby, and such breach continues for a period of thirty (30) days after written notice thereof to the Company, or (h) -7- if the Company is required to convene a shareholders meeting pursuant to Section 5(a)(iii) and fails to convene a meeting of shareholders within the time periods specified in Section 5(a)(iii) or does so convene a meeting of shareholders within such time period but fails to obtain Shareholder Approval at such meeting, or (i) if the Company has breached Section 3(p) of the Registration Rights Agreement (any such failure or breach being referred to as an "EVENT," and for purposes of clauses (a), (c) and (f) the date on which such Event occurs, or for purposes of clause (b) the date on which such five (5) day period is exceeded, or for purposes of clause (d) the date which such 10 Trading Day-period is exceeded, or for purposes of clause (e) the date on which such three Trading Day period is exceeded, or for clause (g) the date on which such thirty (30) day period is exceeded, being referred to as "EVENT DATE"), the Conversion Price shall be decreased by 2% each month (i.e., the Conversion Price would decrease by 2% as of the Event Date and an additional 2% as of each monthly anniversary of the Event Date) until the earlier to occur of the second month anniversary after the Event Date and such time as the applicable Event is cured. Commencing the second month anniversary after the Event Date, the Company shall pay to the Holders $50,000 (each Holder being entitled to receive such portion of such amount as equals its pro rata portion of the Preferred Stock then outstanding) in cash as liquidated damages, and not as a penalty on the first day of each monthly anniversary of the Event Date until such time as the applicable Event, is cured. Any decrease in the Conversion Price pursuant to this Section shall continue notwithstanding the fact that the Event causing such decrease has been subsequently cured. (ii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities or pari passu securities (other than with respect to the Series B Preferred Stock) payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Initial Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 5(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. (iii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall issue rights or warrants to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value of Common Stock at the record date mentioned below, the Initial Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Initial Conversion Price pursuant to this Section 5(c)(iii), the Initial Conversion Price shall immediately upon such expiration be recomputed, and effective immediately upon such expiration, be increased to the price which it would have been (but reflecting any other adjustments in the Initial Conversion Price made pursuant to the provisions of this SECTION 5 after the issuance of such rights or warrants) had the adjustment of the Initial Conversion Price made upon the issuance of such rights or warrants been made on the basis of that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants. -8- (iv) If the Company, at any time while shares of Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 5(c)(ii) and (iii) above), then in each such case the Conversion Price at which each share of Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; PROVIDED, HOWEVER, that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, if the Holders of a majority in interest of the Preferred Stock dispute such valuation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "APPRAISER") selected in good faith by the Holders of a majority in interest of the shares of Preferred Stock then outstanding; and PROVIDED, FURTHER, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holders of Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (v) All calculations under this SECTION 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (vi) Whenever the Conversion Price is adjusted pursuant to Section 5(c)(i),(ii),(iii) or (iv), the Company shall promptly mail to each Holder of Preferred Stock, a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. (vii) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person pursuant to which (i) a majority of the Company's Board of Directors will not constitute a majority of the board of directors of the surviving entity or (ii) less than 50% of the outstanding shares of the capital stock of the surviving entity will be held by the same shareholders of the Company prior to such reclassification, consolidation or merger, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holders of the Preferred Stock then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holders of the Preferred Stock shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which such shares of Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled; PROVIDED, HOWEVER, that if such reclassification, consolidation or merger is (i) approved by the Company's Board of Directors, and (ii) would not prevent the Company from obtaining a pooling of interest treatment as evidenced by a certificate to this effect provided to the Holder by the Company's independent accountants, each Holder shall have the option to require the Company to redeem, from funds legally available therefor at the time of such redemption, its shares of Preferred Stock at a price per share equal to the product of (i) the average Per Share Market Value for the five (5) Trading Days immediately preceding (1) the effective date, the date of the closing or the date of the announcement, as the case may be, of the reclassification, consolidation, merger, sale, transfer or share -9- exchange the triggering such redemption right or (2) the date of payment in full by the Company of the redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio calculated on the date of the closing or the effective date, as the case may be, of the reclassification, consolidation, merger, sale, transfer or share exchange triggering such redemption right, as the case may be. The entire redemption price shall be paid in cash, and the terms of payment of such redemption price shall be subject to the provisions set forth in Section 6(b). The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder of Preferred Stock the right to receive the securities, cash or property set forth in this Section 5(c)(vii) upon any conversion or redemption following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (viii) If: A. the Company shall declare a dividend (or any other distribution) on its Common Stock; or B. the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or C. the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or D. the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property; or E. the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Preferred Stock, and shall cause to be mailed to the Holders of Preferred Stock at their last addresses as they shall appear upon the stock books of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; PROVIDED, HOWEVER, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert shares of Preferred Stock during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice. (ix) If the Company (i) makes a public announcement that it intends to enter into a Change of Control Transaction (as defined below) or (ii) any person, group or entity (including the Company, but -10- excluding a Holder or any affiliate of a Holder) publicly announces a bona fide tender offer, exchange offer or other transaction to purchase 50% or more of the Common Stock (such announcement being referred to herein as a "MAJOR ANNOUNCEMENT" and the date on which a Major Announcement is made, the "ANNOUNCEMENT DATE"), then, in the event that a Holder seeks to convert shares of Preferred Stock on or following the Announcement Date, the Conversion Price shall, effective upon the Announcement Date and continuing through the earlier to occur of the consummation of the proposed transaction or tender offer, exchange offer or other transaction and the Abandonment Date (as defined below), be equal to the lower of (x) the average Per Share Market Value on the five Trading Days immediately preceding (but not including) the Announcement Date and (y) the Conversion Price in effect on the Conversion Date for such Preferred Stock. "ABANDONMENT DATE" means with respect to any proposed transaction or tender offer, exchange offer or other transaction for which a public announcement as contemplated by this paragraph has been made, the date upon which the Company (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) publicly announces the termination or abandonment of the proposed transaction or tender offer, exchange offer or another transaction which caused this paragraph to become operative. (d) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Preferred Stock and payment of dividends on Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Preferred Stock, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5(a) and Section 5(c)) upon the conversion of all outstanding shares of Preferred Stock and payment of dividends hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable. (e) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. (f) The issuance of certificates for shares of Common Stock on conversion of Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. (g) Shares of Preferred Stock converted into Common Stock shall be canceled and shall have the status of authorized but unissued shares of undesignated stock. (h) Any and all notices or other communications or deliveries to be provided by the Holders of the Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to the attention of the Chief Executive Officer of the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or sent -11- by a nationally recognized overnight courier service, addressed to each Holder of Preferred Stock at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 8:00 p.m. (Eastern Standard Time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 8:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) upon receipt, if sent by a nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. Section 6. REDEMPTIONS. (a) All outstanding and unconverted shares of Preferred Stock on the fifth anniversary of the Original Issue Date may be redeemed at any time thereafter by the Company pursuant to this Section 6(a), from funds legally available therefor at a price per share equal to the product of (i) the average Per Share Market Value for the five (5) Trading Days immediately preceding (1) the fifth anniversary of the Original Issue Date or (2) the date of payment in full by the Company of the redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio calculated on the fifth anniversary of the Original Issue Date. Thereafter, all shares of Preferred Stock shall cease to be outstanding and shall have the status of authorized but undesignated stock. The entire redemption price shall be paid in cash. (b) If any portion of the applicable redemption price under Section 6(a) shall not be paid by the Company within seven (7) calendar days after the date due, late fees shall accrue thereon at the rate of 15% per annum until the redemption price plus all such late fees are paid in full (which amount shall be paid as liquidated damages and not as a penalty). In addition, if any portion of such redemption price remains unpaid for more than 7 calendar days after the date due, the Holder of the Preferred Stock subject to such redemption may elect, by written notice to the Company given within 30 days after the date due, to either (i) demand conversion in accordance with the formula and the time frame therefor set forth in Section 5 of all of the shares of Preferred Stock for which such redemption price, plus accrued liquidated damages thereof, has not been paid in full (the "UNPAID REDEMPTION SHARES"), in which event the Per Share Market Price for such shares shall be the lower of the Per Share Market Price calculated on the date such redemption price was originally due and the Per Share Market Price as of the Holder's written demand for conversion, or (ii) invalidate AB INITIO such redemption, notwithstanding anything herein contained to the contrary. If the Holder elects option (i) above, the Company shall within three (3) Trading Days of its receipt of such election deliver to the Holder the shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares subject to such Holder conversion demand and otherwise perform its obligations hereunder with respect thereto; or, if the Holder elects option (ii) above, the Company shall promptly, and in any event not later than three (3) Trading Days from receipt of Holder's notice of such election, return to the Holder all of the Unpaid Redemption Shares. Section 7. PAYMENT RESTRICTIONS. Notwithstanding any provision to the contrary contained herein, if payment of any amounts payable by the Company to the Holders hereunder, including, without limitations, any amounts payable as dividends, penalties or upon redemption of Preferred Stock would be prohibited in the absence of consent from Sumitomo Bank of California pursuant to the Company's Credit Agreement dated August 15, 1997 with Sumitomo Bank of California, as the same may be amended, supplemented, superseded or replaced from time to time, or any replacement facility, then the Company shall use its best efforts to obtain such consent as promptly as practicable after any such payment is required, and any amounts payable by the Company with respect to its obligation to pay any such dividends, penalties, or redemption payments shall continue to accrue until such -12- consent is obtained. Nothing contained in this Section 7 shall be construed as a waiver by the Holders of any rights they may have hereunder. Section 8. DEFINITIONS. For the purposes hereof, the following terms shall have the following meanings: "COMMON STOCK" means the Company's common stock, no par value, and stock of any other class into which such shares may hereafter have been reclassified or changed. "CONVERSION RATIO" means, at any time, a fraction, of which the numerator is Stated Value plus accrued but unpaid dividends (including any accrued but unpaid late fees thereon) but only to the extent not paid in shares of Common Stock in accordance with the terms hereof, and of which the denominator is the Conversion Price at such time. "JUNIOR SECURITIES" means the Common Stock and all other equity securities of the Company which are junior in rights and liquidation preference to the Preferred Stock. "ORIGINAL ISSUE DATE" shall mean the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock. "PER SHARE MARKET VALUE" means on any particular date (a) the closing bid price per share of the Common Stock on such date on the Nasdaq Stock Market or other stock exchange or quotation system on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the Nasdaq Stock Market or any stock exchange or quotation system, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the Nasdaq Stock Market or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the relevant conversion period, as determined in good faith by the Holder, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Appraiser selected in good faith by the Holders of a majority in interest of the shares of the Preferred Stock; PROVIDED, HOWEVER, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser; and PROVIDED, FURTHER that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. "PERSON" means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "PURCHASE AGREEMENT" means the Convertible Preferred Stock Purchase Agreement, dated as of February 2, 1998, among the Company and the original Holders of the Preferred Stock. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of February 2, 1998, by and among the Company and the original Holders. -13- "TRADING DAY" means (a) a day on which the Common Stock is traded on the Nasdaq Stock Market or other stock exchange or market on which the Common Stock has been listed, or (b) if the Common Stock is not listed on the Nasdaq Stock Market or any stock exchange or market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "UNDERLYING SHARES" means the number of shares of Common Stock into which the Shares are convertible and the shares or Common Stock issuable upon payment of dividends thereon, in accordance with the terms hereof and the Purchase Agreement . Section 9. REDEMPTION OPTION UPON TRIGGERING EVENT. In addition to all other rights of the Holders contained herein, after a Triggering Event (as defined below), each Holder shall have the right, at such Holder's option, to require the Company to redeem all or a portion of such Holder's Preferred Stock at a price per share of Preferred Stock equal to the product of (i) the average Per Share Market Value for the five (5) Trading Days immediately preceding (1) the date of the Triggering Event or (2) the date of payment in full by the Company of such redemption price, whichever is greater, and (ii) the Conversion Ratio calculated on the date of the Triggering Event. A "Triggering Event" shall be deemed to have occurred at such time as any of the following events: (i) the failure of the Registration Statement to be declared effective by the Commission on or prior to the date that is 180 days after the Original Issue Date; (ii) while the Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to the Holder of the Preferred Stock for sale of the Registrable Securities (as defined in the Registration Rights Agreement) other than in accordance with the terms of the Registration Rights Agreement, provided that the cause of such lapse or unavailability is not due to factors solely within the control of such Holder seeking to be redeemed pursuant to this Section 8; (iii) the failure of the Common Stock to be listed on the Nasdaq Stock Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc. for a period of seven consecutive days; or (iv) the Company's notice to any Holder of Preferred Stock, including by way of public announcement, at any time, of its intention not to comply with proper requests for conversion of any Preferred Stock into shares of Common Stock. RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of this Corporation be, and they hereby are, authorized and directed to prepare and file a Certificate of Determination of Rights, Preferences and Privileges in accordance with the foregoing resolution and the provisions of California law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution." -14- J. That the authorized number of shares of Preferred Stock of the Corporation is 2,000,000, the number of shares constituting Series A Convertible Preferred Stock (that is the series created by this Certificate and the resolution set forth above) is 100,000 and that no such Preferred Stock has been issued. -15- We further declare under penalty of perjury under the laws of this State of California that the matters set forth in this Certificate are true and correct of our own knowledge. Date: February 2, 1998. /s/ MARY F. BOBEL ------------------------------- Mary F. Bobel, Executive Vice President and Chief Financial Officer /s/ MARIO M. ROSATI ------------------------------- Mario M. Rosati, Secretary -16- EXHIBIT A NOTICE OF CONVERSION AT THE ELECTION OF HOLDER (To be Executed by the Registered Holder in order to Convert shares of Preferred Stock) The undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock indicated below, into shares of Common Stock, no par value (the "Common Stock"), of Genus, Inc. (the "Company") according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. Conversion calculations: ------------------------------------------------------- Date to Effect Conversion ------------------------------------------------------- Number of shares of Preferred Stock to be Converted ------------------------------------------------------- Number of shares of Common Stock to be Issued ------------------------------------------------------- Applicable Conversion Price ------------------------------------------------------- Signature ------------------------------------------------------- Name ------------------------------------------------------- Address EXHIBIT B NOTICE OF CONVERSION AT THE ELECTION OF THE COMPANY The undersigned in the name and on behalf of Genus, Inc. (the "COMPANY") hereby notifies the addressee hereof that the Company hereby elects to exercise its right to convert [ ] shares of its 6% Series A Convertible Preferred Stock (the "PREFERRED STOCK") held by the Holder into shares of Common Stock, no par value (the "COMMON STOCK") of the Company according to the terms hereof, as of the date written below. No fee will be charged to the Holder for any conversion hereunder, except for such transfer taxes, if any which may be incurred by the Company if shares are to be issued in the name of a person other than the person to whom this notice is addressed. Conversion calculations: ------------------------------------------------------- Date to effect Conversion ------------------------------------------------------- Number of shares of Preferred Stock to be Converted ------------------------------------------------------- Number of shares of Common Stock to be Issued ------------------------------------------------------- Applicable Conversion Price ------------------------------------------------------- Name of Holder ------------------------------------------------------- Address of Holder EX-99.1 5 EXHIBIT 99.1 EXHIBIT 99.1 Company Contact: Agency Contact: Mary Bobel Bob Climo Genus, inc. M & C Communications 408/747-7120 408/736-1120 GENUS COMPLETES $5 MILLION EQUITY FINANCING SUNNYVALE, CALIF., February 12, 1998 - Genus, Inc. (OTC, NASDAQ: GGNS) a leading manufacturer of process simplification equipment for the semiconductor industry, today announced that the Company has completed a private equity placement of $5 million of convertible preferred stock to a group of institutional investors. Upon the fulfillment of certain specified conditions, these same investors have also committed to provide additional financing of up to $5 million dollars. A registration statement will be filed by the Company with the Securities and Exchange Commission in order to register the resale of the shares of common stock underlying the convertible preferred stock. "These additional funds reaffirm our commitment to investing in R&D during the next year. By continuing the development of our tungsten nitride barrier film for Genus' LYNX2 CVD system and enhancing the energy range of our Kestrel implanter products, we believe Genus will be well-positioned to meet the future manufacturing requirements of our customers," commented James T. Healy, Genus president and chief executive officer. Founded in 1982, Genus, Inc. develops, manufactures, markets and services advanced thin film deposition and ion implantation equipment used in the fabrication of advanced semiconductor devices. The company's customers include semiconductor manufacturers located throughout the United States, Europe and the Pacific Rim, including Japan, Korea and Taiwan. Genus' corporate offices are located at 1139 Karlstad Drive, Sunnyvale, CA 94089; telephone: (408) 747-7120; fax: (408) 747-7199; e-mail: PR@GENUS.COM; Internet: WWW.GENUS.COM. This release contains forward looking statements dependent on a number of risks and uncertainties, including, but not limited to, retrenchment in the semiconductor industry, general conditions in the company's industry sector, and the additional risks and uncertainties detailed under "Management's Discussion and Analysis of Results of Operations and Financial Condition" contained in the company's annual report on Form 10-K for the fiscal year ended December 31, 1996, and the company's quarterly report on Form 10-Q for the quarter ended September 30, 1997. ### -2- -----END PRIVACY-ENHANCED MESSAGE-----