Exhibit 10.1
RICHARDSON
ELECTRONICS, LTD.
as the
Company
and
BUYERS,
as defined
herein
SECURITIES PURCHASE
AGREEMENT
Dated as of
November 21, 2005
8.0% Convertible Senior Subordinated
Notes due 2011
SECURITIES PURCHASE
AGREEMENT
THIS SECURITIES PURCHASE
AGREEMENT (the
“Agreement”), dated as of November 21, 2005, by and
among Richardson Electronics, Ltd., a Delaware corporation (the
“Company”), and the Buyers listed on the Schedule of
Buyers attached hereto as Exhibit A (individually, a
“Buyer” and, collectively, the
“Buyers”).
THE PARTIES TO THIS
AGREEMENT enter into this
Agreement on the basis of the following facts, intentions and
understandings:
A. In
accordance with the terms and conditions of this Agreement, the
Company has agreed to issue and sell, and the Buyers have severally
agreed to purchase in the aggregate, Twenty-Five Million United
States Dollars ($25,000,000) principal amount of the
Company’s 8.0% Convertible Senior Subordinated Notes due 2011
(such Convertible Senior Subordinated Notes, substantially in the
form attached as Exhibit A to the Indenture (as defined
below), as such form of Note may be amended, modified or
supplemented from time to time in accordance with the terms
thereof, the “Notes”), which shall be convertible into
shares of the common stock, $0.05 par value per share (the
“Common Stock”), of the Company (as converted, the
“Conversion Shares”). The Notes will be issued pursuant
to an Indenture, dated as of November 21, 2005 (the
“Indenture”) by and between the Company and Law
Debenture Trust Company of New York, as trustee (the
“Trustee”), substantially in the form attached hereto
as Exhibit B .
B. Contemporaneously
with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C
(as the same may be amended, modified or supplemented from time to
time in accordance with the terms thereof, the “Registration
Rights Agreement”) pursuant to which the Company has agreed
to provide the Buyers with the benefit of certain registration
rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the “Securities
Act”) and applicable state securities laws, on the terms and
subject to the conditions set forth therein.
NOW THEREFORE
, in consideration of the promises
and the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and each of the Buyers hereby
agree as follows:
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SECTION 1.
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Purchase and Sale of Notes.
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(a)
Purchase of Notes . Subject to the satisfaction (or waiver,
to the extent permitted by applicable law) of the conditions set
forth in Sections 6 and 7 of this Agreement, the Company shall
issue and sell to each Buyer, and each Buyer severally and not
jointly agrees to purchase from the Company, the respective
principal amount of Notes set forth opposite such Buyer’s
name on the Schedule of Buyers attached hereto as
Exhibit A (the “Closing”). The Company
shall issue to each Buyer One Thousand United States Dollars
($1,000) principal amount of the Notes for each One Thousand United
States Dollars ($1,000) tendered by each such Buyer.
(b)
The Closing . The date and time of the Closing (the
“Closing Date”) shall be 10:00 a.m., Chicago time,
on November 21, 2005 or at such other time as the parties may
agree,
subject to the satisfaction (or
waiver, to the extent permitted by applicable law) of the
conditions set forth in Sections 6 and 7 of this Agreement. The
Closing shall occur on the Closing Date at the offices of Bryan
Cave LLP, One Metropolitan Square, 211 North Broadway, Suite 3600,
St. Louis, Missouri 63102-2750 or at such other location as the
parties may agree.
(c)
Form of Payment . On the Closing Date, (i) each Buyer shall
pay the Company for the Notes to be issued and sold to such Buyer
on the Closing Date, by wire transfer of immediately available
funds in accordance with the Company’s written wire
instructions attached hereto on Schedule A , or through
book-entry settlement procedures, as applicable, (ii) the
Company shall reimburse each Buyer for its reasonable expenses to
the extent required by Section 4(i) of this Agreement, and (iii)
the Company shall issue to each Buyer properly authenticated Notes
(in the denominations of not less than One Thousand United States
Dollars ($1,000) as such Buyer shall reasonably request)
representing the principal amount of Notes which such Buyer is then
purchasing hereunder, duly executed on behalf of the Company and
registered in the name of such Buyer; provided, that Notes eligible
for services through The Depository Trust Company
(“DTC”) shall be issued, countersigned, registered and
delivered in global certificate form through the facilities at DTC
in such names and denominations as each Buyer shall
specify.
SECTION
2. Buyer’s Representations and
WarrantiesEach Buyer represents and warrants to the Company with
respect to only itself that as of the date hereof, and as of the
Closing Date:
(a)
Investment Purpose . Such Buyer is acquiring the Notes for
its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution
thereof; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Notes or the
shares of Common Stock issued upon conversion of the Notes,
including any Additional Shares (as defined in the Indenture) and
shares of Common Stock issued in payment of the Company Conversion
Provisional Payment (as defined in the Indenture) (collectively,
the “Conversion Shares” and, together with the Notes,
the “Securities”) for any minimum or other specific
term and reserves the right to dispose of the Securities at any
time; provided, further, that such disposition shall be in
accordance with or pursuant to a registration statement or an
exemption under the Securities Act.
(b)
Accredited Investor and Qualified Institutional Buyer Status
. Such Buyer is an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D under the Securities Act
and a “qualified institutional buyer” as that term is
defined in Rule 144A(a) under the Securities Act as of the date of
this Agreement and was not organized for the specific purpose of
acquiring the Securities.
(c)
Reliance on Exemptions . Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of the United States
federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and such Buyer’s compliance
with, the representations, warranties, covenants, agreements,
acknowledgments and understandings of such Buyer set forth herein
and in the applicable Note in order to determine the availability
of such exemptions and the eligibility of such Buyer to acquire the
Securities.
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(d)
Information . Such Buyer acknowledges that it (i) has been
furnished with or has had full access to all of the information
that it considers necessary or appropriate for deciding whether to
purchase the Securities, including a copy of the Confidential
Private Placement Memorandum, (ii) has had an opportunity to ask
questions and receive answers from the Company regarding the terms
and conditions of the Offering, (iii) has had access to information
about the Company and the Subsidiaries (as defined below) and their
respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to
evaluate its investment, (iv) can bear the economic risk of a total
loss of its investment in the Securities and (v) has such knowledge
and experience in business and financial matters so as to enable it
to understand the risks of and form an investment decision with
respect to its investment in the Securities. Neither such inquiries
nor any other due diligence investigations conducted by such Buyer
or its advisors, if any, or its representatives shall limit,
modify, amend or affect the Company’s representations and
warranties contained in this Agreement or any other Transaction
Document and the Buyer’s right to rely thereon.
(e)
No Governmental Review . Such Buyer understands that no
United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon
or endorsed the merits of the offering of the
Securities.
(f)
Transfer or Resale . Such Buyer understands that, except as
provided in the Registration Rights Agreement, the Securities have
not been registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or
transferred without registration under the Securities Act or an
exemption therefrom and that, in the absence of an effective
registration statement under the Securities Act, such Securities
may only be sold under certain circumstances as set forth in the
Securities Act. In that connection, such Buyer is aware of Rule 144
and Rule 144A under the Securities Act and the restrictions imposed
thereby.
(1) Such
Buyer understands that any certificate evidencing such Notes (and
all securities issued in exchange therefor or in substitution
thereof, other than Common Stock, if any, issued upon conversion
thereof) shall bear a legend in substantially the following
form:
THE SECURITIES EVIDENCED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE INITIAL HOLDER
(1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL
BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT);
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THE SECURITY EVIDENCED HEREBY RESELL OR OTHERWISE
TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE
UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY
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THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (D)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY
IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(D)
ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH SECURITY
(OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(D) ABOVE), THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE
TO J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, AS REGISTRAR
(OR ANY SUCCESSOR REGISTRAR, AS APPLICABLE). IF THE PROPOSED
TRANSFER IS PURSUANT TO CLAUSE 2(C) ABOVE, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO J.P. MORGAN TRUST COMPANY, NATIONAL
ASSOCIATION, AS REGISTRAR (OR ANY SUCCESSOR REGISTRAR, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS AND OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THIS SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 2(C)
OR 2(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL
ISSUANCE OF THE SECURITY EVIDENCED HEREBY.
Any stock certificate representing
Common Stock issued upon conversion of such Note shall bear a
legend in substantially the following form:
THE COMMON STOCK EVIDENCED HEREBY
HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE
EXPIRATION OF TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY
UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS
ISSUED, (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON
STOCK EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY
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SUBSIDIARY THEREOF, (B) IN
COMPLIANCE WITH AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OR (C) IN ACCORDANCE WITH A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND THAT CONTINUES
TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; (2) PRIOR TO ANY SUCH
TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(C) ABOVE), IT
WILL FURNISH TO LASALLE BANK NATIONAL ASSOCIATION, AS TRANSFER
AGENT (OR ANY SUCCESSOR, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS AND OTHER INFORMATION AS THE COMPANY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL
DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE l(C) ABOVE) A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL
BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY PURSUANT TO CLAUSE l(C) ABOVE OR THE EXPIRATION OF
TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE
CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS
ISSUED.
Unless issued pursuant to a
registration statement declared effective under the Securities Act,
each Note or share of Common Stock issued upon conversion of such
Note shall bear the legends set forth above, as the case may be,
until the earliest of:
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(A)
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two years after the original issuance date of
such Note;
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(B) such
Note or Common Stock has been sold (x) pursuant to a registration
statement that has been declared effective under the Securities Act
(and which continues to be effective at the time of such sale) or
(y) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (subject to the satisfaction of any
requirement to furnish any certification, legal opinion or other
information in accordance with the applicable legend and the
Indenture); or
(C) such
Common Stock has been issued upon conversion of Notes that have
been sold (x) pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to
be effective at the time of such sale) or (y) pursuant to the
exemption from registration provided by Rule 144 under the
Securities Act (subject to the satisfaction of any requirement to
furnish any certification, legal opinion or other information in
accordance with the applicable legend and the
Indenture).
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(2) Such
Buyer understands that, in the event Rule 144(k) as promulgated
under the Securities Act (or any successor rule) is amended to
change the two-year period under Rule 144(k) (or the corresponding
periods under any successor rule), (i) each reference in Sections
2(g)(1) of this Agreement to “two (2) years” or the
“two-year period” shall be deemed for all purposes of
this Agreement to be references to such changed period, and (ii)
all corresponding references in the Notes shall be deemed for all
purposes to be references to the changed period, provided that such
changes shall not become effective if they are otherwise prohibited
by, or would otherwise cause a violation of, the then-applicable
federal securities laws.
(h)
Authorization; Enforcement; Validity . Such Buyer is an
entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by this Agreement and the
Registration Rights Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by
such Buyer of the transactions contemplated by this Agreement has
been duly authorized by all necessary corporate or, if such Buyer
is not a corporation, such partnership, limited liability company
or other applicable like action, on the part of such Buyer. Each of
this Agreement and the Registration Rights Agreement has been duly
executed by such Buyer, and when delivered by such Buyer in
accordance with terms hereof, will constitute the valid and legally
binding obligation of such Buyer, enforceable against it 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.
(i)
Residency . Such Buyer is a resident of that country or
state specified in its address on the Schedule of Buyers attached
hereto as Exhibit A and is incorporated in the
jurisdiction noted on Exhibit A .
(j)
No Conflicts . The execution and performance of this
Agreement and the Registration Rights Agreement do not conflict
with any agreement to which such Buyer is a party or is bound
thereby, any court order or judgment addressed to such Buyer, or
the constituent documents of such Buyer except for such conflicts
which would not, individually or in the aggregate, have a material
adverse effect on such Buyer's authority or ability to perform its
obligations under this Agreement or the Resale Registration Rights
Agreement.
(k)
Conversion Limitation . (A) Subject to such Buyer’s
election on the signature pages hereto to be governed by this
Section 2(k)(A), such Buyer hereby agrees that in no event will it
convert, and the Company will not honor any conversion request
presented to it that requests the conversion of, any of the Notes
in excess of the number of such Notes upon the conversion of which
(x) the number of shares of Common Stock beneficially owned by such
Buyer (other than the shares which would otherwise be deemed
beneficially owned except for being subject to a limitation on
conversion or exercise analogous to the limitation contained in
this Section 2(k)(A)) plus (y) the number of shares of
Common Stock issuable upon the conversion of such Notes would be
equal to or exceed 9.99% of the number of shares of Common Stock
then issued and outstanding (after giving effect to such conversion
or exercise), it being the intent of the Company and such Buyer
that a Buyer electing to be governed by this
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Section 2(k)(A) not be deemed at any
time to have the power to vote or dispose of greater than 9.99% of
the number of shares of Common Stock issued and outstanding. As
used herein, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
“Exchange Act”). To the extent that the limitation
contained in this Section 2(k)(A) applies (and without limiting any
rights the Company may otherwise have), the Company may rely on
such Buyer’s determination of whether the Notes are
convertible pursuant to the terms hereof, the Company having no
obligation whatsoever to verify or confirm the accuracy of such
determination, and the submission of the Conversion Notice (as that
term is defined in the Note) by such Buyer shall be deemed to be
such Buyer’s representation that the Notes specified therein
are convertible or exercisable pursuant to the terms hereof.
Nothing contained herein shall be deemed to restrict the right of
such Buyer to convert the Notes at such time as the conversion or
exercise thereof will not violate the provisions of this Section
2(k)(A). By written notice to the Company, such Buyer may increase
or decrease the maximum percentage stated in this paragraph to any
other percentage specified in such notice; provided, that any such
increase will not be effective until the sixty first (61st) day
after such notice is delivered to the Company and provided further
that in no event shall the percentage stated in this paragraph
exceed 9.99%. Notwithstanding anything herein this restriction may
not be waived by the Company, and notwithstanding anything to the
contrary, this Section 2(k)(A) shall not apply to a Buyer unless
the Buyer has elected to be governed by this Section by so
indicating on the signature page.
(B) Subject
to such Buyer’s election on the signature pages hereto to be
governed by this Section 2(k)(B), such Buyer hereby agrees that in
no event will it convert, and the Company will not honor any
conversion request presented to it that requests the conversion of,
any of the Notes in excess of the number of such Notes, upon the
conversion of which (x) the number of shares of Common Stock
beneficially owned by such Buyer (other than the shares which would
otherwise be deemed beneficially owned except for being subject to
a limitation on conversion analogous to the limitation contained in
this Section 2(k)(B)) plus (y) the number of shares of
Common Stock issuable upon the conversion of such Notes would be
equal to or exceed 4.99% of the number of shares of Common Stock
then issued and outstanding (after giving effect to such
conversion), it being the intent of the Company and such Buyer that
a Buyer electing to be governed by this Section 2(k)(B) not be
deemed at any time to have the power to vote or dispose of greater
than 4.99% of the number of shares of Common Stock issued and
outstanding. As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act. To
the extent that the limitation contained in this Section 2(k)(B)
applies (and without limiting any rights the Company may otherwise
have), the Company may rely on such Buyer’s determination of
whether the Notes are convertible pursuant to the terms hereof, the
Company having no obligation whatsoever to verify or confirm the
accuracy of such determination, and the submission of the
Conversion Notice (as that term is defined in the Note) by such
Buyer shall be deemed to be such Buyer’s representation that
the Notes specified therein are convertible or exercisable pursuant
to the terms hereof. Nothing contained herein shall be deemed to
restrict the right of such Buyer to convert the Notes at such time
as the conversion or exercise thereof will not violate the
provisions of this Section 2(k)(B). By written notice to the
Company, such Buyer may increase or decrease the maximum percentage
stated in this paragraph to any other percentage specified in such
notice; provided, that any such increase will not be effective
until the sixty-first (61st) day after such notice is delivered to
the Company and provided further that in no event shall the
percentage stated in this paragraph exceed 4.99%.
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Notwithstanding anything herein to
the contrary, this restriction may not be waived by the Company,
and notwithstanding anything herein to the contrary, this Section
2(k)(B) shall not apply to a Buyer unless the Buyer has elected to
be governed by this Section by so indicating on the signature
page.
(l)
Additional Acknowledgement . Each Buyer acknowledges that it
has independently evaluated the merits of the transactions
contemplated by this Agreement, the Indenture, the Notes and the
Registration Rights Agreement, that it has independently determined
to enter into the transactions contemplated hereby and thereby,
that it is not relying on any advice from or evaluation by any
other Buyer, and that it is not acting in concert with any other
Buyer in purchasing the Securities offered hereunder. The Buyers
have not taken any actions that would cause such Buyers to be
deemed as members of a “group” for purposes of Section
13(d) of the Exchange Act.
(m)
General Solicitation . Such Buyer is not purchasing the
Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or any other general
solicitation or general advertisement.
(n)
Certain Trading Activities . Such Buyer has not directly or
indirectly, nor has any person acting on behalf of or pursuant to
any understanding with such Buyer, engaged in any transactions in
the securities of the Company (including, without limitations, any
Short Sales involving the Company’s securities) since the
time that such Buyer was first contacted by the Company or Piper
Jaffray (as defined below) regarding an investment in the Company.
Such Buyer covenants that neither it nor any person acting on its
behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this
Agreement are publicly disclosed. As used herein, “Short
Sales” shall include, without limitation, all “short
sales” as defined in Rule 200 promulgated under Regulation
SHO under the Exchange Act and all types of direct and indirect
stock pledges, forward sale contracts, options, puts, calls, swaps
and similar arrangements (including on a total return basis), and
sales and other transactions through non-US broker dealers or
foreign regulated brokers.
(o)
Limited Ownership . The purchase by such Buyer of the
Securities issuable to it at the Closing will not result in such
Buyer (individually or together with any other person with whom
such Buyer has identified, or will have identified, itself as part
of a “group” in a public filing made with the
Commission (as defined below) involving the Company’s
securities) acquiring, or obtaining the right to acquire, in excess
of 19.999% of the outstanding shares of Common Stock or the voting
power of the Company on a post transaction basis that assumes that
the Closing shall have occurred. Such Buyer does not presently
intend to, alone or together with others, make a public filing with
the Commission to disclose that it has (or that it together with
such other persons have) acquired, or obtained the right to
acquire, as a result of the Closing (when added to any other
securities of the Company that it or they then own or have the
right to acquire), in excess of 19.999% of the outstanding shares
of Common Stock or the voting power of the Company on a post
transaction basis that assumes that the Closing shall have
occurred.
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(p)
Acknowledgment Regarding Buyer’s Purchase of
Securities . The Buyer acknowledges and agrees that it is
acting solely in the capacity of arm’s length purchaser with
respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that it is not (i) an officer
or director of the Company, (ii) to the knowledge of the Buyer, an
“affiliate” of the Company (as defined in Rule 144) or
(iii) a “beneficial owner” of more than 10% of the
Common Stock (as defined for purposes of Rule 13d-3 of the Exchange
Act). The Buyer further acknowledges that no other Buyer is acting
as a financial advisor or fiduciary of such Buyer (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Buyer
acknowledges and agrees that the Company makes no representations
or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.
SECTION
3. Representations and Warranties of the
Company. The Company represents and warrants to each of the Buyers
that as of the date hereof:
(a)
Organization and Qualification . The Company and its
Subsidiaries (as defined below) are corporations, partnerships or
limited liability companies duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated or organized, and have the requisite corporate,
limited liability company or partnership power and authorization to
own their properties and to carry on their business as now being
conducted except as would not, individually or in the aggregate,
have a Material Adverse Effect. Copies of the Company’s
Certificate of Incorporation and Bylaws, and all amendments
thereto, have been filed as exhibits to the Company’s SEC
Documents (as defined in Section 3(f) of this Agreement), are in
full effect and have not been modified. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation,
partnership or limited liability company to do business and is in
good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted and proposed to be
conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this
Agreement, “Material Adverse Effect” means any material
adverse effect on (i) the business, properties, assets, operations,
prospects, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole,
(ii) the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or (iii) the
authority or ability of the Company to perform its obligations
under the Transaction Documents (as defined below).
“Subsidiary” means any entity in which the Company,
directly or indirectly, owns or controls a majority of the ordinary
voting power, capital stock or other equity or similar interests
and which is required to be set forth in Exhibit 21 to the
Company’s Annual Report on Form 10-K for the year ended May
28, 2005.
(b)
Authorization; Enforcement; Validity . The Company has the
requisite corporate power and authority to enter into and perform
its obligations under this Agreement, the Indenture, the Notes, the
Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5 of this Agreement) and each
of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement
(collectively, the “Transaction Documents”), and to
issue and sell the Securities in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without
limitation, the issuance and repayment of the Notes, the
reservation for
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issuance and the issuance of the
Conversion Shares issuable upon conversion thereof and the
registration for resale of the Registrable Securities (as such term
is defined in the Registration Rights Agreement), have been duly
authorized by the Company’s Board of Directors and no further
consent or authorization is required of the Company’s Board
of Directors or shareholders. The Transaction Documents have been
duly executed and delivered by the Company. The Transaction
Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their
terms, except (i) as rights to indemnification and contribution may
be limited by federal or state securities laws and policies
underlying such laws and (ii) as such enforceability may be limited
by general principles of equity or applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or similar laws relating to, or affecting generally,
the enforcement of creditors’ rights and remedies.
(c)
Capitalization . Except for any shares issuable upon
exercise of options issued pursuant to employee benefit or other
plans disclosed in the Company’s SEC Documents, the
capitalization of the Company is as described in the
Company’s SEC Documents. All of the Company’s
outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable and were issued in
accordance with applicable federal and state securities laws. The
Company’s Common Stock is registered pursuant to Section
12(g) of the Exchange Act and is listed for trading on The NASDAQ
National Market (the “Principal Market”). Except for
rights created pursuant to the Transaction Documents or as set
forth in the SEC Documents, including, without limitation, the
financial statements included therein, (i) no shares of the
Company’s capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances created by
the Company; (ii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any
of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
Subsidiaries (other than any such options, warrants, scrip, rights,
calls, commitments, securities, understandings and arrangement
outstanding under plans disclosed in the SEC Documents); (iii)
there are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments
evidencing indebtedness of the Company or any of its Subsidiaries
or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no amounts outstanding under, and there will
be no amounts due upon termination of, any credit agreement or
credit facility; (v) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to
register the sale of any of its securities under the Securities
Act; (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or
similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (vii) there are no securities
or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities as described in
this Agreement; (viii) the Company does not have any stock
appreciation rights or “phantom” stock plans or
agreements or any similar plan or agreement; (ix) the Company and
its Subsidiaries have no liabilities or obligations required to be
disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in
10
the ordinary course of the
Company’s or its Subsidiaries’ respective businesses
and which, individually or in the aggregate, do not or would not
have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole; and (x) the Company does not have outstanding
stockholder purchase rights or “poison pill” or any
similar arrangement in effect giving any person or entity the right
to purchase any equity interest in the Company upon the occurrence
of certain events.
(d)
Issuance of Securities . The Securities are duly authorized
and, upon issuance in accordance with the terms of the applicable
Transaction Documents, shall be (i) validly issued, fully paid
and non-assessable and (ii) free from all taxes, liens and charges
with respect to the issuance thereof, other than any liens or
encumbrances created by or imposed by the Buyers, and shall not be
subject to preemptive rights or other similar rights of
shareholders of the Company. As of the Closing, at least 2,546,072
shares of Common Stock (subject to adjustment pursuant to the
Company’s covenant set forth in Section 4(e) of this
Agreement) will have been duly authorized and reserved for issuance
upon conversion of the Notes. Upon issuance of the Notes in
accordance with this Agreement and conversion or issuance in
accordance with the terms of the Notes, the Conversion Shares will
be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof, other
than any liens or encumbrances created by or imposed by the Buyers,
with the holders being entitled to all rights accorded to a holder
of Common Stock. Subject to the accuracy of the representations and
warranties of each of the Buyers in this Agreement and assuming
that Piper Jaffray has not conducted a general solicitation within
the meaning of the Securities Act with respect to the Securities,
the issuance by the Company of the Securities is exempt from
registration under the Securities Act and applicable state
securities laws.
(e)
No Conflicts . The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Notes and the
reservation for issuance and issuance of the Conversion Shares)
will not (i) result in a violation of the Company’s
Certificate of Incorporation or Bylaws; (ii) 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 to which the Company or any
of its Subsidiaries is a party, except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have
a Material Adverse Effect or which have been waived in writing; or
(iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market)
applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is
bound or affected except as would not, individually or in the
aggregate, result in a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is in violation of any material term of
or in default under its Certificate of Incorporation, Bylaws or
their organizational charter or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any term of
or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or
any statute, rule or regulation applicable to the Company or its
Subsidiaries, except where such violations and defaults would not
result, either individually or in the aggregate, in a Material
Adverse Effect. The business of
11
the Company and its Subsidiaries is
not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations
would not result, either individually or in the aggregate, in a
Material Adverse Effect. Except as specifically contemplated by
this Agreement, as required under the Securities Act or as required
by Blue Sky filings (but only to the extent that such filings may
be made after the Closing) and as required pursuant to the terms of
the Company’s Amended and Restated Revolving Credit Agreement
dated October 29, 2004, as amended (the “Amended and Restated
Credit Agreement”), the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any
regulatory or self-regulatory agency or other person or entity in
order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents. All consents,
authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and copies of
such consents, authorizations, orders, filings and registrations
have been delivered to the Buyers. The Company is not in violation
of the listing requirements of the Principal Market, and has no
actual knowledge of any facts which could reasonably lead to
delisting or suspension of the Common Stock by the Principal Market
in the foreseeable future. The Company and its Subsidiaries are not
in violation of any covenants or other terms of its outstanding
indebtedness for borrowed money, which could reasonably be expected
to have a Material Adverse Effect. To the knowledge of the Company,
there are no facts or circumstances which are reasonably likely to
give rise to any of the foregoing events set forth in this
paragraph. For purposes of this Agreement, “knowledge of the
Company” and similar terms means the actual knowledge of the
Chief Executive Officer, the President or the Chief Financial
Officer of the Company.
(f)
SEC Documents; Financial Statements . For the twelve months
preceding the date hereof (or such shorter period as the Company
was required by law to file such reports), the Company has filed
all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange
Commission (the “Commission”) pursuant to the reporting
requirements of the Exchange Act, (all of the foregoing filed prior
to or on the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as
the “SEC Documents”). As of the date of filing of such
SEC Documents, each such SEC Document, as it may have been
subsequently amended by filings made by the Company with the
Commission prior to the date hereof, complied in all material
respects with the requirements of the Exchange Act applicable to
such SEC Document and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under
which they are or were made, not misleading. As amended, the
financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable
accounting requirements and published rules and regulations of the
Commission with respect thereto. Such financial statements, as
amended, have been prepared in accordance with generally accepted
accounting principles, consistently applied in the United States
(“GAAP”), during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements,
to the extent they may exclude footnotes or may be condensed or
summary statements), correspond to the books and records of the
Company and fairly present in all material respects the financial
position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and cash flows for the
periods then ended. Ernst & Young LLP are independent
public
12
accountants as required by the
Exchange Act. The Company is not aware of any issues raised by the
Commission with respect to any of the SEC Documents. No other
written information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2(d) of this
Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they are or were made, not misleading. The Company is not required
to file and will not be required to file, any agreement, note,
lease, mortgage, deed or other instrument entered into prior to the
date hereof and to which the Company is a party or by which the
Company is bound which has not been previously filed as an exhibit
to its reports filed with the Commission under the Exchange Act.
Except for the issuance of the Notes contemplated by this
Agreement, no event, liability, development or circumstance has
occurred or exists with respect to the Company or its Subsidiaries
or their respective business, properties, operations or financial
condition, that is required to be disclosed by the Company under
applicable securities laws and which has not been publicly
disclosed. The Company has no reason to believe that its
independent auditors will withhold their consent to the inclusion
of their audit opinion concerning the Company’s financial
statements which shall be included in the Registration Statement
(as such term is defined in the Registration Rights
Agreement).
(g)
Absence of Litigation . Except as disclosed in the section
titled “Legal Proceedings” in the Company’s
Annual Report on Form 10-K for the fiscal year ended May 28,
2005, there is no action, suit, proceeding, inquiry or
investigation (“Material Litigation”) before or by any
court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened in writing against the Company
or any of its Subsidiaries or any of the Company’s or the
Subsidiaries’ officers or directors in their capacities as
such that would have a Material Adverse Effect. The Company
believes it has set aside on its books provisions reasonably
adequate for the payment of all judgments, damages, costs, and
expenses arising out of its pending Material Litigation and has
appropriately accounted for such reserves under GAAP.
(h)
No Integrated Offering . Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act
or any applicable shareholder approval provisions, including,
without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of
its Subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other
offerings.
(i)
Intellectual Property Rights . The Company and its
Subsidiaries own, possess, license or can acquire or make use of on
reasonable terms, adequate rights or licenses to use all
trademarks, trade names, trade dress, service marks, service mark
registrations, service names, patents, patent rights, copyrights,
inventions, technology licenses, approvals, governmental
authorizations, trade secrets, and other intellectual property
rights (collectively, “Intellectual Property”)
necessary to conduct their respective businesses as now conducted
and as currently contemplated to be conducted by them as described
in the SEC Documents, except where the
13
failure to currently own or possess
Intellectual Property would not have a Material Adverse Effect. The
Company does not have any knowledge of any infringement by the
Company or its Subsidiaries of Intellectual Property rights of
others, or of any development of similar or identical trade secrets
or technical information by others, except where such infringement
would not have a Material Adverse Effect. There is no claim, action
or proceeding being made by the Company or its Subsidiaries
regarding the Intellectual Property rights of the Company or its
Subsidiaries or to the Company’s knowledge, brought or
currently threatened against the Company or its Subsidiaries
regarding the Intellectual Property rights of or the use of any
Intellectual Property by the Company or its Subsidiaries of any
third party that, if the subject of an unfavorable decision, ruling
or finding, would have a Material Adverse Effect.
(j)
Insurance . The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are commensurate with
similarly situated companies engaged in similar businesses as the
Company and its Subsidiaries. The Company has no reason to believe
that it will not be able to renew any existing insurance coverage
as and when such coverage expires or to obtain similar coverage as
may be necessary to continue to do business as currently conducted
without a significant increase in cost, other than normal increases
in the industry.
(k)
Regulatory Permits . The Company and its Subsidiaries
possess all material certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as currently conducted (the “Permits”),
except where the failure to possess such Permits would not have a
Material Adverse Effect, and neither the Company nor any of its
Subsidiaries has received any written notice of proceedings
relating to the revocation or material modification of any such
Permit.
(l)
Tax Status . The Company and each of its Subsidiaries (i)
has filed all federal and state income and all other material tax
returns, reports and declarations required by any jurisdiction to
which it is subject and all such tax returns are accurate and
complete in all material respects, (ii) has paid all taxes and
other governmental assessments and charges due with respect to the
periods covered by such returns, reports and declarations, except
those being contested in good faith and for which the Company has
made appropriate reserves on its books in accordance with GAAP, and
(iii) has recorded on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations (referred to in clause
(i) above) apply. Except as disclosed in the SEC Documents, there
are no unpaid taxes or assessments for tax deficiencies that are
individually or in the aggregate material in amount claimed to be
due by the taxing authority of any jurisdiction, and the Company
knows of no basis for any such claim, and the Company knows of no
audits in progress with respect to any tax returns, no extension of
time in force with respect to any date on which any tax return was
or is to be filed, and no waiver or agreement in force for the
extension of time for the assessment or payment of any tax. Except
as disclosed in the SEC Documents, all provisions for tax
liabilities of the Company and each of its Subsidiaries have been
disclosed in the Company’s financial statements and made in
accordance with GAAP consistently applied, and all liabilities for
taxes of the Company and each of its Subsidiaries attributable to
periods prior to or ending on the Closing Date have been adequately
disclosed in the Company’s financial statements.
14
(m)
Application of Takeover Protections . The Company and its
Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under
the Certificate of Incorporation, the laws of the state of its
incorporation or the laws of any other state which is applicable to
the Buyers as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company’s
issuance of the Securities and the Buyers’ ownership, voting
or disposition of the Securities.
(n)
Foreign Corrupt Practices . Neither the Company nor any of
its Subsidiaries, nor, to the Company’s knowledge, any
director, officer, agent, employee or other person acting on behalf
of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company or any Subsidiary used any
corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; made any
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or
is in violation of any provision of the United States Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or
employee.
(o)
Confidential Private Placement Memorandum . The information
supplied by the Company for inclusion or incorporation by reference
in the Confidential Private Placement Memorandum dated as of
November 18, 2005 (the “Confidential Private Placement
Memorandum”) in connection with the Offering does 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 are made, not misleading. If, at any time prior to the Closing
Date, any event with respect to the Company shall occur which is
required to be described in the Confidential Private Placement
Memorandum in order for the Confidential Private Placement
Memorandum not to contain any untrue
