PREFERRED STOCK PURCHASE AGREEMENT
EXECUTION
COPY
PREFERRED
STOCK PURCHASE AGREEMENT (this
“Agreement”),
dated
as of July 28, 2006, by and between Airspan Networks, Inc., a Washington
corporation (the “Company”),
and
Oak Investment Partners XI, Limited Partnership, a Delaware Limited Partnership
(the “Purchaser”).
RECITALS:
A. WHEREAS,
the
Purchaser desires to transfer all shares of the Company’s Series A Preferred
Stock, par value US$0.0001 per share (the “Series
A Preferred Stock”)
held
by the Purchaser to the Company, and to pay an additional US$29,000,000 in
cash
to the Company, in exchange for up to 200,690 shares of a newly designated
class
of the Company’s preferred stock, par value U.S.$0.0001 per share, entitled
Series B Preferred Stock (the “Series
B Preferred Stock”);
AGREEMENT:
In
consideration of the foregoing premises and the mutual covenants contained
herein, the sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
SECTION
1. PURCHASE AND SALE OF PREFERRED STOCK
1.1 Purchase
and Sale.
(a) Purchase
and Sale.
Subject
to the terms and conditions hereof, including the conditions set forth in
Sections 5, 6 and 7, (i) the Purchaser shall transfer to the Company all shares
of Series A Preferred Stock owned by Purchaser as of the Closing Date (as
defined below) and the Company will issue 1.3793150684931 shares of Series
B
Preferred Stock to the Purchaser for each share of Series A Preferred Stock
so
transferred (accordingly, if on the Closing Date the Purchaser transfers 73,000
shares of Series A Preferred Stock, the Company will issue 100,690 shares of
Series B Preferred Stock in exchange therefor), and (ii) the Purchaser shall
pay
Twenty Nine Million Dollars (US$29,000,000) (collectively, the “Purchase
Price”)
to the
Company, and the Company shall issue and sell to the Purchaser, at two hundred
ninety dollars (US$290.00) per share, 100,000 shares of Series B Preferred
Stock
(the up to 200,690 shares of Series B Preferred Stock issued pursuant hereto
are
referred to as the “Offered
Securities”).
(b) Time
and Place of Closing.
The
closing of the purchase and sale of the Offered Securities (the “Closing”) shall
be held at the offices of Hunton & Xxxxxxxx, 0000 Xxxxxxxx Xxxxxx,
00xx
Xxxxx,
Xxxxx, XX 00000 (by means of facsimile or overnight mail). On the first business
day after the conditions set forth in Sections 5, 6 and 7 (other than those
to
be satisfied on the Closing Date, which shall be satisfied or waived on such
date) have been satisfied or waived by the party entitled to waive such
conditions or such later date and time as the parties may agree in writing
(the
“Closing
Date”),
(A)
the Purchaser shall (x) deliver to the Company by wire transfer in immediately
available funds to an account or accounts designated in writing by the Company
to the Purchaser at least one business day prior to the Closing Date, funds
in
the amount of US$29,000,000 and (y) make or cause to be made the deliveries
set
forth in Section 7 and (B) the Company shall (x) issue and deliver to the
Purchaser all of the shares of the Series B Preferred Stock registered in the
name of the Purchaser and (y) make or cause to be made the deliveries set forth
in Section 6.
SECTION
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants as of the date hereof to Purchaser
that:
2.1 The
Company has been duly incorporated and is an existing corporation in good
standing under the laws of the State of Washington, with requisite corporate
power and authority to own its properties and conduct its business as presently
conducted. The Company is duly qualified to do business as a foreign corporation
in good standing in all other U.S. jurisdictions in which its ownership or
lease
of property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a material adverse effect
on
(x) the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries, taken as a whole, or (y) the
ability of the Company to complete the transactions contemplated hereby
(hereinafter, a “Material
Adverse Effect”).
The
Company has furnished representatives of the Purchaser with correct and complete
copies of the Articles of Incorporation (the “Articles
of Incorporation”)
and
Bylaws (“Bylaws”)
of the
Company, both as amended and currently in effect.
2.2 Each
subsidiary of the Company has been duly incorporated and is an existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own its properties and
conduct its business as presently conducted. Each subsidiary of the Company
is
duly qualified to do business as a foreign corporation in good standing in
all
other U.S. jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure
to
be so qualified would not have a Material Adverse Effect. All of the issued
and
outstanding capital stock of each subsidiary of the Company has been duly
authorized and validly issued and is fully paid and nonassessable and is owned
of record by the Company.
2.3 As
of the
date hereof, the authorized capital stock of the Company consists of:
(i) 100,000,000 shares of Common Stock and (ii) five million
(5,000,000) shares of Preferred Stock. As of July 24, 2006,
39,927,492 shares
of
Common Stock have been issued and are outstanding, 138,250 shares of Restricted
Stock have been issued and are outstanding and 73,000 shares of Series A
Preferred Stock are issued and outstanding. As of July 24, 2006, other than
with
respect to an aggregate of 9,532,800 shares of Common Stock reserved for
issuance under the Company’s equity incentive plans and 7,300,000 shares of
Common Stock reserved for issuance upon conversion of the Series A Preferred
Stock, there are no outstanding options, warrants, rights (including conversion
or preemptive rights and rights of first refusal), proxy or shareholder
agreements, or agreements of any kind for the purchase or acquisition from
the
Company of any of its equity securities. As of the Closing Date, there will
be
250,000 shares of Series B Preferred Stock reserved for issuance and a
sufficient number of authorized but unissued shares of Common Stock reserved
for
issuance upon the conversion of the Series B Preferred Stock. Provided that
the
Purchaser complies with Section 4.8 below, immediately upon the Closing, there
will be no shares of Series A Preferred Stock outstanding.
2.4 The
Offered Securities, and the shares of Common Stock issuable upon conversion
of
the Offered Securities (the “Conversion
Shares”),
and
all outstanding shares of capital stock of the Company have been duly
authorized. All outstanding shares of capital stock of the Company have been
validly issued and are fully paid and nonassessable. When the Offered Securities
have been delivered and paid for in accordance with this Agreement on the
Closing Date, and, when the Conversion Shares have been delivered in accordance
with the terms of the Articles of Amendment to the Articles of Incorporation
to
be filed pursuant to this Agreement with the Secretary of State of the State
of
Washington setting forth the preferences and privileges of the Series B
Preferred Stock (the “Articles
of Amendment”),
such
Offered Securities and Conversion Shares will have been, validly issued, fully
paid and nonassessable. None of the Offered Securities or Conversion Shares
are
subject to any preemptive right or any right of refusal. The Company does not
believe that the
right
of the holders of at least a majority of the outstanding shares Series A
Preferred Stock to approve the issuance of the Offered Securities constitutes
a
preemptive right or a right of first refusal.
2.5 Subject
in part to the accuracy of the Purchaser’s representations herein, no consent,
waiver, approval, authorization, or order of, or registration, declaration
or
filing with, any governmental agency or body, any court or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority (a “Governmental
Entity”)
is
required for the consummation of the transactions contemplated by this
Agreement, except for (i) the filing of a Form D with the Securities and
Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”),
and
such as may be required under state securities law, (ii) the provision of the
Articles of Amendment with the Secretary of State of the State of Washington,
(iii) the filing of the Proxy Statement (as defined in Section 4.5(a)) with
the
SEC in accordance with the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”),
(iv)
the approval from the NASDAQ Global Market (the “NASDAQ”)
for
the listing of the Conversion Shares for trading thereon, and (v) the filing
of
the Notification and Report Forms with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the “HSR
Act”)
and
the expiration or termination of the applicable waiting period under the HSR
Act
(collectively, the “Required
Regulatory Approvals”).
2.6 This
Agreement has been duly authorized, executed and delivered by the Company.
All
corporate action on the part of the Company and its shareholders, directors
and
officers necessary for the authorization, execution and delivery of this
Agreement, the execution and filing of the Articles of Amendment, the issuance
of the Offered Securities and the Conversion Shares, the consummation of the
other transactions contemplated hereby and the Articles of Amendment and the
performance of all the Company’s obligations hereunder and under the Articles of
Amendment has been taken or will be taken prior to the Closing. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, (ii)
rules of law governing specific performance, injunctive relief and other
equitable remedies, and (iii) the limitations imposed by applicable federal
or state securities laws on the indemnification provisions contained in this
Agreement.
2.7 The
Board
of Directors (the “Board
of Directors”)
has
determined this Agreement and the transactions contemplated hereby to be
advisable and in the best interests of the Company and its shareholders and
has
approved such transactions. The transactions contemplated hereby have been
approved for purposes of Section 23.B.19.040(1) of the Washington Business
Corporation Act. The affirmative vote of the holders of a majority of the
outstanding shares of the Series A Preferred Stock is required under the
Company’s Articles of Incorporation to approve the issuance of the Series B
Preferred Stock and the affirmative vote of the holders of a majority of the
total votes cast in person or by proxy at the Shareholders Meeting (as defined
in Section 4.5(c)) is required under the rules of NASDAQ to approve the issuance
of the Series B Preferred Stock. In
addition, the Board of Directors has determined that it is advisable to seek
the
affirmative vote of the holders of a majority of the total votes cast in person
or by proxy at the Shareholders Meeting excluding votes cast by the Purchaser
and its Affiliates in accordance with prevailing concepts of statutory and/or
common law
(collectively,
the “Required
Vote”).
Except for the Required Vote, no approval of this Agreement, the Articles of
Amendment or the transactions contemplated by this Agreement by the holders
of
any shares of stock of the Company is required in connection with the execution,
delivery or performance of this Agreement or the Articles of Amendment or the
consummation of the transactions contemplated by this Agreement, whether
pursuant to the Washington Business Corporation Act, the Articles of
Incorporation or Bylaws, the rules and regulations of the NASD, NASDAQ or
otherwise.
2.8 Assuming
that the Required Regulatory Approvals and the Required Vote are obtained,
the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby will not result in a breach or violation of (i) any of
the
terms and provisions of the Articles of Incorporation or Bylaws of the Company
or any of its subsidiaries, nor (ii) any of the terms and provisions of, or
constitute a default under any statute, rule, regulation or order of any
Governmental Entity, or any agreement or instrument to which the Company or
any
such subsidiary is a party or by which the Company or any such subsidiary is
bound or to which any of the properties of the Company or any such subsidiary
is
subject (except where such breaches, violations or defaults individually or
in
the aggregate would not have a Material Adverse Effect).
2.9 There
have been no investment bankers, brokers or finders used by the Company or
any
affiliate (as defined in Rule 501(b) of Regulation D under the Securities Act)
(an “Affiliate”)
of the
Company in connection with the transactions contemplated by this Agreement
and
no persons or entities are entitled to a fee or compensation from the Company
or
its subsidiaries in respect thereof.
2.10 Except
for liens or encumbrances created in connection with any Permitted Loan
Financing (as such term is defined in Section 4.7(i)), the Company and its
subsidiaries have good and marketable title to all real properties and all
other
properties and assets owned by them that are material to the operation of the
Company’s business, in each case free from liens, encumbrances and defects that
would materially affect the value thereof or materially interfere with the
use
made or to be made thereof by them. The Company and its subsidiaries hold any
leased, real or personal property that is material to the operation of the
Company’s business under a valid and enforceable lease with no exceptions that
would materially interfere with the use made or to be made thereof by
them.
2.11 The
Company and its subsidiaries possess adequate certificates, authorities or
permits issued by appropriate Governmental Entities necessary to conduct the
business now operated by them and have not received any notice of proceedings
relating to the revocation or modification of any such certificate, authority
or
permit that, if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a Material Adverse
Effect.
2.12 With
the
exception of the litigation described in the Company’s SEC Documents (defined
below), as of the date hereof, there are no pending actions, suits or
proceedings against or affecting the Company, any of its subsidiaries or any
of
their respective properties or any director, officer or employee (related to
any
such person’s services as a director, officer or employee of the Company) that,
if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or would
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, and, to the Company’s knowledge, no such
actions, suits or proceedings are threatened or contemplated. As of the date
hereof, the Company has not initiated and has no plan to initiate any action,
suit or proceeding that, if decided adversely to the Company, would,
individually or in the aggregate, result in a Material Adverse
Effect.
2.13 The
Company has made available to representatives of the Purchaser all registration
statements, proxy statements and other statements, reports, schedules, forms
and
other documents filed by the Company with SEC since January 1, 2006, including
copies of all the exhibits referenced therein (the “SEC
Documents”).
All
statements, reports, schedules, forms and other documents required to have
been
filed by the Company with the SEC since January 1, 2006 have been so filed.
As
of their respective dates (or, if amended or superseded by a filing prior to
the
date of this Agreement, then on the date of such amendment or superseding
filing): (i) each of the SEC Documents complied in all material respects with
the applicable requirements of the Securities Act or the Exchange Act, as the
case may be; and (ii) none of the SEC Documents 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 the light
of
the circumstances under which they were made, not misleading.
2.14 The
financial statements included in the SEC Documents present fairly the financial
position of the Company and its consolidated subsidiaries as of the dates shown
and their results of operations and cash flows for the periods shown, and such
financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis (except as may be indicated in the notes to such financial statements
or,
in the case of unaudited statements, as permitted by Form 10-Q and Form 8-K
of
the SEC, and except that the unaudited financial statements may not have
contained footnotes and were subject to normal and recurring year-end
adjustments which were not, or are not reasonably expected to be, individually
or in the aggregate, material in amount), complied as to form in all material
respects with the published rules and regulations of the SEC applicable
thereto.
2.15 The
Company and its subsidiaries own or possess, or can acquire on reasonable terms,
sufficient legal rights to all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable propriety or confidential information, systems or
procedures), trademarks, service marks and trade names currently employed by
them in connection with the business now operated by them, and neither the
Company nor any of its subsidiaries has received any notice of infringement
of
or conflict with asserted rights of others with respect to any of the foregoing
that, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect.
2.16 Neither
the Company nor any Affiliate of the Company has, directly, or through any
agent, (a) sold, offered for sale, solicited any offers to buy or otherwise
negotiated in respect of, any security (as defined in the Securities Act) which
is or will be integrated with the sales of the Offered Securities in a manner
that would require the registration under the Securities Act of the Offered
Securities; or (b) offered, solicited offers to buy or sold the Offered
Securities in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act; and the Company will not engage in any of the actions described in
subsections (a) and (b) of this paragraph.
2.17 Subject
to the accuracy of the Purchaser’s representations herein, it is not necessary
in connection with the offer, sale and delivery of the Offered Securities to
the
Purchaser in the manner contemplated by this Agreement to register the Offered
Securities under the Securities Act.
2.18 The issuance
of the Offered Securities and the Conversion Shares, neither individually nor
in
the aggregate, constitute an anti-dilution event for any existing
securityholders of the Company, pursuant to which such securityholders would
be
entitled to additional securities or a reduction in the applicable conversion
price or exercise price of any securities due to any issuance proposed to be
conducted hereunder. The Company does not believe that the
right
of the holders of at least a majority of the outstanding shares Series A
Preferred Stock to approve the issuance of the Offered Securities constitutes
an
anti-dilution event.
2.19 As
of the
date hereof, the Company satisfies the requirements for use of Form S-3 for
registration of the resale of the Registrable Securities by the Holders (as
hereinafter defined).
SECTION
3. Representation
and Warranties of the Purchaser.
The
Purchaser hereby represents and warrants to the Company, as of the date hereof,
as follows:
3.1 The
Purchaser is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite limited
partnership power and authority to consummate the transactions contemplated
hereby. Oak Associates XI, LLC (the “General
Partner”)
is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to consummate the transactions contemplated hereby. The General
Partner has the power and authority to execute and deliver this Agreement on
behalf of the Purchaser.
3.2 The
Purchaser has full limited partnership power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
(a)
laws of general application relating to bankruptcy, insolvency and the relief
of
debtors, (b) rules of law governing specific performance, injunctive relief
and
other equitable remedies, and (c) the limitations imposed by applicable
federal or state securities laws on the indemnification provisions contained
in
this Agreement.
3.3 The
execution, delivery and performance of this Agreement, and the purchase and
acceptance of the Offered Securities by the Purchaser will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under any statute, rule, regulation or order of any governmental agency
or body or any court, domestic or foreign, having jurisdiction over the
Purchaser or any subsidiary of the Purchaser or any of their properties, or
any
material agreement or instrument to which the Purchaser or any such subsidiary
is a party or by which Purchaser or any such subsidiary is bound or to which
any
of the properties of the Purchaser or any such subsidiary is subject, or the
certificate of limited partnership, partnership agreement, and other
organizational documents of the Purchaser or any such subsidiary (except where
any such breaches, violations or defaults individually or in the aggregate
would
not have a Material Adverse Effect on the Purchaser’s ability to perform this
Agreement).
3.4 The
Purchaser owns, and immediately prior to the Closing, will own beneficially
and
of record, free and clear of any liens, encumbrances, equities or claims, good
and valid title to the shares of Series A Preferred Stock to be transferred
by
the Purchaser to the Company hereunder on the Closing Date. There exist no
shareholder agreements, voting trusts, proxies, or other contracts with respect
to the sale, transfer, registration or voting of the shares of Series A
Preferred Stock to be transferred by the Purchaser to the Company
hereunder.
3.5 Investment
Representations.
(a) The
Purchaser and the General Partner are sophisticated in transactions of this
type
and capable of evaluating the merits and risks of the transactions described
herein and have the capacity to protect their own interests. The Purchaser
has
not been formed solely for the purpose of entering into the transactions
described herein and is acquiring the Offered Securities for investment for
its
own account, not as a nominee or agent, and not with the view to, or for resale,
distribution thereof, in whole or in part.
(b) The
Purchaser has not and does not intend to enter into any contract, undertaking,
agreement or arrangement with any person or entity to sell, transfer or pledge
the Offered Securities, other than a sale, transfer or pledge to an Affiliate,
partner or former partner of Purchaser in compliance with the Securities
Act.
(c) The
Purchaser acknowledges its understanding that the Company intends to sell the
Offered Securities pursuant to a private placement exempt from registration
under the Securities Act. In furtherance thereof, the Purchaser represents
and
warrants that it is an “accredited investor” as that term is defined in Rule 501
of Regulation D under the Securities Act, has the financial ability to bear
the
economic risk of its investment, has adequate means for providing for its
current needs and personal contingencies and has no need for liquidity with
respect to its investment in the Company. The Purchaser further represents
and
warrants that the General Partner is an “accredited investor” as that term is
defined in Rule 501 of Regulation D under the Securities Act,
(d) The
Purchaser agrees that it shall not sell or otherwise transfer any of the Offered
Securities without registration under the Securities Act, pursuant to Rule
144
(or any successor rule) under the Securities Act or pursuant to an opinion
of
counsel reasonably satisfactory to the Company that no violation of the
Securities Act will be involved in such transfer. The Purchaser fully
understands that none of the Offered Securities have been registered under
the
Securities Act or under the securities laws of any applicable state or other
jurisdiction and, therefore, cannot be resold, pledged, assigned or otherwise
disposed of unless subsequently registered under the Securities Act and under
the applicable securities laws of such states or jurisdictions or an exemption
from such registration is available. The Purchaser understands that the Company
is under no obligation to register the Offered Securities on its behalf with
the
exception of certain registration rights set forth herein. The Purchaser
understands the lack of liquidity and restrictions on transfer of the Offered
Securities and that this investment is suitable only for a person or entity
of
adequate financial means that has no need for liquidity of this investment
and
that can afford a total loss of its investment.
3.6 There
is
no legal, administrative, arbitration or other action or proceeding or
governmental investigation pending, or to the knowledge of the Purchaser
threatened, against the Purchaser that challenges the validity or performance
of
this Agreement or which, if successful, could hinder or prevent the Purchaser
from performing its obligations hereunder.
3.7 There
have been no investment bankers, brokers or finders used by the Purchaser or its
Affiliates in connection with the transactions contemplated by this Agreement
and no persons or entities are entitled to a fee or compensation in respect
thereof.
3.8 As
of the
date hereof, the Purchaser has (or has rights to obtain), and at all times
prior
to Closing will have (or will have rights to obtain), sufficient funds available
to enable the Purchaser to consummate the transactions contemplated hereby
and
to pay the Purchase Price.
SECTION
4. COVENANTS PRIOR TO CLOSING
4.1 Subject
to the terms of this Agreement, each of the Company and the Purchaser shall
use
reasonable efforts to take all actions and do all things advisable and proper
in
order to consummate and make effective the transactions contemplated by this
Agreement, including, but not limited to, (i) the taking of all reasonable
acts
necessary to cause the conditions precedent set forth in Sections 5, 6 and
7 to
be satisfied, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities and the making of all necessary registrations, declarations and filings
(including registrations, declarations and filings with Governmental Entities,
if any) and the taking of all reasonable steps as may be necessary to avoid
any
suit, claim, action, investigation or proceeding by any Governmental Entity
related to the transactions contemplated hereby, (iii) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby and (iv) the execution or delivery of any
additional instruments necessary to consummate the transactions contemplated
by,
and to fully carry out the purposes of, this Agreement. The Purchaser shall,
on
or prior to the Closing Date, execute and deliver to the Company a unanimous
written consent of the sole holder of the Series A Preferred Stock approving
the
Articles of Amendment and, at the Shareholders Meeting, shall vote all of its
shares of Series A Preferred Stock to approve the transactions contemplated
hereby .
4.2 During
the period from the date of this Agreement until the Closing (the “Pre-Closing
Period”),
the
Company shall (and shall cause its subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives
of
the Purchaser reasonable access during normal business hours to all its books,
records, properties, plants and personnel and, during such Pre-Closing Period,
the Company shall (and shall cause its subsidiaries to) furnish promptly to
the
Purchaser all information concerning the Company and the Company’s business,
properties and personnel as the Purchaser may reasonably request. Any
investigation by the Purchaser shall not affect the representations and
warranties of the Company or the conditions to its obligations to consummate
the
transactions contemplated by this Agreement. The Purchaser agrees that it shall
keep any information obtained pursuant to this Section 4.2 in confidence (except
as required by legal process) and will not, and it will cause its
representatives not to, use any information obtained pursuant to this Section
4.2 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement.
4.3 During
the Pre-Closing Period, the Company shall give prompt written notice to the
Purchaser of the occurrence or non-occurrence of any event known to the Company
the occurrence or non-occurrence of which would reasonably be expected to cause
any representation or warranty contained in Section 2 of this Agreement to
be
untrue, or the failure of the Company to comply with or satisfy any covenant
or
agreement under this Agreement. During the Pre-Closing Period, the Purchaser
shall give prompt written notice to the Company of the occurrence or
non-occurrence of any event known to the Purchaser the occurrence or
non-occurrence of which would reasonably be expected to cause any representation
or warranty contained in Section 3 of this Agreement to be untrue, or the
failure of the Purchaser to comply with or satisfy any covenant or agreement
under this Agreement.
9
PREFERRED
STOCK PURCHASE AGREEMENT
4.4 At
or
prior to the Closing Date, the Company will take all actions necessary,
including, if necessary, to increase the size of the Board of Directors, so
that, as of the Closing Date, the person designated by the Purchaser to serve
on
the Company’s Board of Directors (the “Board
Designee”)
is
appointed as a member of the Company’s Board of Directors. The Purchaser shall
use its best efforts to provide the Company with any and all information
regarding the Board Designee reasonably requested by the Company.
4.5 Preparation
of Proxy Statement; Shareholders Meeting.
(a) As
promptly as practicable following the date of this Agreement, the Company shall
prepare and file with the SEC a proxy statement relating to the transactions
contemplated by this Agreement (as amended or supplemented from time to time,
the “Proxy
Statement”)
and
the Company shall use commercially reasonable efforts to respond as promptly
as
practicable to any comments of the SEC with respect thereto and to cause the
Proxy Statement to be mailed to the Company's shareholders as promptly as
practicable following the date of this Agreement. The Company shall promptly
notify the Purchaser upon the receipt of any comments from the SEC or its staff
or any request from the SEC or its staff for amendments or supplements to the
Proxy Statement and shall provide the Purchaser with copies of all
correspondence between the Company and its representatives, on the one hand,
and
the SEC and its staff, on the other hand which relates directly to the Proxy
Statement (not including any documents that may be incorporated by reference
therein). Notwithstanding the foregoing, prior to filing or mailing the Proxy
Statement (or any amendment or supplement thereto) or responding to any comments
of the SEC with respect thereto, the Company shall provide the Purchaser an
opportunity to review and comment on such document or response which relates
directly to the Proxy Statement (not including any documents that may be
incorporated by reference therein).
(b) If
requested by the Company, the Purchaser shall use its commercially reasonable
efforts to assist the Company in preparing the Proxy Statement, including,
without limitation, providing to the Company any information regarding the
Purchaser required to be included therein.
(c) The
Company shall, as promptly as practicable following the date of this Agreement,
establish a record date (which will be as promptly as reasonably practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its shareholders for the purpose of obtaining the Required
Vote (the “Shareholders
Meeting”).
The
Company shall, through its Board of Directors, recommend to its shareholders
that they adopt this Agreement and the transactions contemplated hereby, and
shall include such recommendation in the Proxy Statement, provided, however,
that the foregoing shall not prohibit the Board of Directors from withdrawing,
modifying or changing such recommendation at any time to the extent that the
Board of Directors determines to do so in the exercise of their fiduciary
duties; provided, further, nothing in the preceding proviso will relieve the
Company of its obligations under this Agreement except for the obligation set
forth in this sentence and in the first sentence of Section 4.5(d). If the
Company fails to obtain the Required Vote at such Shareholders Meeting and
this
Agreement is not otherwise terminated by the Purchaser or the Company pursuant
to Section 11, the Company shall use commercially reasonable efforts to obtain
the Required Vote at each successive shareholders meeting until the Required
Vote is obtained.
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STOCK PURCHASE AGREEMENT
(d) Subject
to the terms of Section 4.5(c) above, the Board of Directors shall recommend
the
approval, adoption and authorization of the transactions contemplated hereby.
Notwithstanding the Board’s withdrawal, modification or change of its
recommendation in accordance with the terms hereof, the Company shall take
all
lawful action to solicit such approval, adoption and authorization.
4.6 Promptly
following the execution of this Agreement, the Company shall (i) submit to
the
NASDAQ Listing Qualifications Department (the “Listing
Department”)
the
Listing of Additional Shares Notification Form (the “LAS
Form”)
for
the Conversion Shares and any supporting documentation required to be enclosed
pursuant to Part V.A. of the LAS Form and (ii) respond to any requests from
the
Listing Department for further information or documentation, or to discuss
any
matters relating to this Agreement and the transactions contemplated hereby.
Purchaser agrees to reasonably cooperate in connection with its compliance
with
the first sentence of this Section 4.6. To the extent that the NASDAQ indicates
that any changes to the form of Articles of Amendment attached hereto as
Exhibit
A
or to
any terms of the transactions contemplated by this Agreement are required to
comply with NASDAQ Marketplace Rule 4351, the Purchaser and the Company hereby
agree to make any modifications necessary to such form of Articles of Amendment
to comply with NASDAQ Marketplace Rule 4351.
4.7 Conduct
of the Company’s Business During the Pre-Closing Period. With
the
exception of the Company’s cost reduction proposals, during the Pre-Closing
Period, the Company shall, and shall cause each of its material subsidiaries
to
operate its business only in the usual and ordinary course of business
consistent with past practice and use commercially reasonable efforts to
preserve the relationships with its customers, suppliers, employees and other
persons having business relations with the Company or its material subsidiaries.
Without limiting the generality of the foregoing, prior to the Closing, the
Company shall not (and shall not permit any of its subsidiaries to) without
the
prior written consent of the Purchaser:
(a) except
as
contemplated by this Agreement, (i) declare or pay any dividends on or make
other distributions (whether in cash, stock or other property) in respect of
any
of its capital stock, (ii) split, combine, subdivide or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly-owned subsidiary
of
the Company which remains a wholly-owned subsidiary after consummation of such
transaction, or (iii) repurchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock or any securities convertible into
or exercisable for any shares of its capital stock;
(b) except
as
contemplated herein, amend its Articles of Incorporation or Bylaws, as the
case
may be;
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STOCK PURCHASE AGREEMENT
(c) issue
or
agree to issue, deliver, sell, dispose, pledge or encumber, or authorize or
propose the issuance, delivery, sale, disposition, pledge or encumbrance of,
any
shares of its capital stock of any class or other securities or any securities
convertible into or exercisable or exchangeable for, or any rights, warrants,
calls, commitments or options to acquire, any such shares or securities, or
enter into any agreement with respect to any of the foregoing and shall not
amend any equity-related awards issued pursuant to the Company’s equity
incentive plans, other than (i) the issuance of shares of the Company’s Common
Stock upon the exercise of options outstanding on the date of this Agreement,
(ii) the issuance of equity awards pursuant to the Company’s Omnibus Equity
Compensation Plan in the ordinary course of business and consistent with past
practice, (iii) the issuance of shares of the Company’s Common Stock pursuant to
the Company’s Employee Stock Purchase Plan issued in the ordinary course of
business and consistent with past practice, (iv) the issuance of shares of
the
Company’s Common Stock pursuant to the Company’s 401(k) plan issued in the
ordinary course of business and consistent with past practice, and (v) the
issuance of shares of Common Stock or any securities convertible into or
exercisable or exchangeable for, or any rights, warrants, calls, commitments
or
options to acquire, of Common Stock (“Equity
Issuances”)
if
such issuances, when aggregated with all prior Equity Issuances entered into
after the date hereof do not result in gross proceeds to the Company in excess
of $4,000,000 in the aggregate (collectively, “Excluded
Issuances”);
(d) amend
or
modify any stock option plan or employee stock ownership or purchase plan as
in
existence as of the date hereof or adopt any new stock option plan or employee
stock purchase plan;
(e) directly
or indirectly engage in any transaction, arrangement or contract with any
officer, director or Affiliate or, with respect to or otherwise relating to
such
shareholder's shares, a shareholder of the Company which is not in the ordinary
course of business and at arm's length;
(f) acquire,
sell, license, lease or dispose of any material assets outside the ordinary
course of business consistent with past practice;
(g) adopt
a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any
of
its material subsidiaries, other than the Company’s cost reduction proposals;
(h) sell
all
or substantially all of the Company’s assets or participate in a transaction
that constitutes a change of control of the Company (For purposes of this
Agreement, a “change in control” shall be defined as a reorganization, merger,
consolidation or other form of corporate transaction or series of transactions,
in each case, with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, own more than 50% of
the
combined voting power entitled to vote generally in the election of directors
of
the reorganized, merged or consolidated company’s then outstanding voting
securities, in substantially the same proportions as their ownership immediately
prior to such reorganization, merger, consolidation or other
transaction);
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STOCK PURCHASE AGREEMENT
(i) engage
in
the conduct of any business other than its existing business;
(j) create
any new debt instrument or bank line or increase any existing bank line or
debt
obligation (or similar arrangement pursuant to which the Company is or becomes
indebted) (a “Loan
Financing”),
other
than (i) trade payables in the ordinary course of business, (ii) capital lease
lines, and (iii) a Loan Financing that individually or in the aggregate with
other Loan Financings entered into after the date hereof does not result in
proceeds to the Company in excess of $10,000,000 (a “Permitted
Loan Financing”);
and
(k) take
any
action that could reasonably be expected to result in (i) any of the
representations or warranties of the Company set forth in this Agreement
becoming untrue or (ii) any of the conditions set forth in Section 5 or 6 not
being satisfied.
(l) Notwithstanding
the foregoing, (i) nothing in this Section 4.7 shall prohibit the Company from
taking any action or omitting to take any action as required or as expressly
contemplated by this Agreement and (ii) the Company may take such actions as
are
reasonably necessary or advisable to consummate the transactions contemplated
by
this Agreement.
4.8 During
the Pre-Closing Period, the Purchaser shall not transfer, sell, dispose, pledge
or encumber (a “Transfer”)
any of
the shares of Series A Preferred Stock owned by the Purchaser as of the date
hereof unless, prior to such Transfer, the Purchaser has converted the shares
of
Series A Preferred Stock subject to Transfer into shares of the Company’s Common
Stock in
accordance with Section 4.12.4(c) of the Articles of Incorporation and taken
any
and all actions that may be required pursuant to Section 4.12.4(d) of the
Articles of Incorporation to effect such conversion.
4.9 No
Solicitation.
(a) Until
the
earlier of (x) the termination of this Agreement pursuant to Section 11.1 and
(y) the Closing Date (the period from the date of this Agreement until such
earlier date is referred to herein as the “Exclusivity
Period”),
and
(i) except as set forth in subsection (b) below, neither the Company and its
Affiliates nor any of their respective subsidiaries (collectively, the
“Restricted
Parties”
and
each a “Restricted
Party”)
shall,
directly or indirectly, initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or would
reasonably be expected to result in, a Competing Transaction (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Competing Transaction,
or agree to or endorse any Competing Transaction, or authorize or permit any
of
their respective officers, directors, employees, consultants or agents or any
investment banker, financial advisor, attorney, accountant or other
representative retained by any Restricted Party to take any such action; and
(ii) the Company shall notify the Purchaser (as promptly as practicable, but
in
any event, within three business days) if any written or oral request for
information or proposal relating to a Competing Transaction is made and shall
keep the Purchaser promptly advised of all such requests and proposals (unless
providing such information is prohibited by a confidentiality provision). As
used herein, the term “Competing
Transaction”
shall
mean the offer or sale of equity or equity-linked securities of the Company
to a
third party other than the Purchaser (other than Excluded
Issuances).
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STOCK PURCHASE AGREEMENT
(b) Notwithstanding
the foregoing, at any time prior to obtaining the Required Vote, in response
to
a bona fide proposal that the Board of Directors determines in good faith
constitutes a Superior Proposal (as defined below), and which proposal was
unsolicited and made after the date hereof and did not otherwise result from
a
breach of this Section 4.9, the Company may, for a period of seven calendar
days
from the date of receipt of the initial proposal from any such person or entity
(x) furnish information with respect to the Company to the person or entity
making such proposal, and (y) participate in discussions or negotiations with
the person or entity making such proposal. The Company will promptly furnish
a
copy of any such Superior Proposal that is in writing to the Purchaser, and
if
such Superior Proposal is oral, the Company will promptly furnish the Purchaser
with a reasonably detailed description of the material terms of such Superior
Proposal. For purposes of this Agreement, a “Superior
Proposal”
means
any proposal made by a third party if the proposal is otherwise on terms which
the Board of Directors determines in its good faith judgment to be (A) more
favorable to the Company's shareholders from a financial point of view than
the
transactions contemplated by this Agreement (taking into account all the terms
and conditions of such proposal and this Agreement (including any changes to
the
financial terms of this Agreement proposed by the Purchaser in response to
such
offer or otherwise)), and (B) reasonably capable of being completed, taking
into
account all financial, timing, legal, regulatory and other aspects of such
proposal.
SECTION
5. CONDITIONS OF THE OBLIGATIONS OF THE EACH PARTY.
The
respective obligations of each party to this Agreement to effect the purchase
and sale of the Offered Securities shall be subject to the satisfaction at
or
prior to the Closing Date of the following conditions:
5.1 The
Required Vote shall have been obtained and shall be in full force and
effect.
5.2 No
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which (i) is in effect and (ii) has the effect of making the transactions
contemplated by this Agreement illegal or otherwise prohibiting or preventing
consummation of the transactions contemplated by this Agreement; provided,
however, that prior to invoking this condition, each party agrees to comply
with
Section 4.1.
5.3 All
waiting periods (and any extension thereof) under the HSR Act relating to the
transactions contemplated by this Agreement have expired or terminated early.
5.4 Either
(a) fifteen (15) days shall have lapsed from the date the LAS Form was delivered
to the Listing Department without objection from the NASDAQ or (b) the NASDAQ
shall have accepted or indicated that it will not object to the transactions
contemplated by this Agreement prior to the expiration of such fifteen (15)
day
period.
14
PREFERRED
STOCK PURCHASE AGREEMENT
SECTION
6. CONDITIONS OF THE OBLIGATIONS OF THE PURCHASER.
The
obligations of the Purchaser to purchase and pay for the Offered Securities
on
the Closing Date will be subject to the satisfaction, or waiver by the
Purchaser, of each of the conditions below:
6.1 The
representations and warranties of the Company herein must be materially correct
and complete on the Closing Date except that (i) representations and warranties
made as of a specific date need only be correct and complete in all material
respects on such date and (ii) for purposes of determining if such
representations are “materially” correct, all materiality qualifications
included in such representations and warranties shall be disregarded); the
Company must have performed all of its obligations hereunder required to be
performed in all material respects prior to the Closing Date; and the Company
shall have delivered to the Purchaser a certificate, dated as of the Closing
Date and signed by an executive officer of the Company, to the foregoing
effect.
6.2 The
Company shall have duly adopted, executed and filed with the Secretary of State
of Washington the Articles of Amendment in the form attached hereto as
Exhibit
A
(subject
to any changes made pursuant to Section 4.6). The Articles of Amendment shall
be
in full force and effect under the laws of the State of Washington as of the
Closing Date and shall not have been amended or modified.
6.3 The
Board
Designee shall have been appointed to the Company’s Board of Directors, and the
Company shall have entered into an indemnification agreement, in the Company’s
standard form, with the Board Designee.
6.4 The
Purchaser must have received a customary opinion, dated the Closing Date, from
Hunton & Xxxxxxxx, LLP counsel for the Company, in the form attached hereto
as Exhibit
B.
6.5 The
business, assets, financial condition and operations of the Company shall be
substantially as represented to the Purchaser and no change shall have occurred
that, in the reasonable good faith judgment of the Purchaser, is or could have
a
Material Adverse Effect, provided,
however, that
no
change constituting or related to (i) the economy or financial markets of
the United States of America or any other region, (ii) any change, effect
or development that is primarily caused by conditions generally effecting the
industry in which the Company conducts its business, (iii) any change that
is
primarily caused by the announcement or pendency of this Agreement or the
transactions contemplated hereby, or (iv) any generally applicable change in
law, rule or regulation, including, but not limited to, United States generally
accepted accounting principles. The Purchaser must have received a certificate,
dated the Closing Date, of an officer of the Company to the foregoing
effect.
SECTION
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to sell the Offered Securities on the Closing Date
to
the Purchaser in exchange for the Purchase Price will be subject to the
satisfaction, or waiver by the Company, of each of the conditions
below:
15
PREFERRED
STOCK PURCHASE AGREEMENT
7.1 The
representations and warranties of the Purchaser herein must be materially
correct and complete on the Closing Date (except that representations and
warranties made as of a specific date need only be correct and complete in
all
material respects on such date); the Purchaser must have performed all of its
obligations hereunder required to be performed in all material respects prior
to
the Closing Date; and the Purchaser shall have delivered to the Company a
certificate, dated as of the Closing Date and signed by an authorized
representative of the Purchaser, to the foregoing effect.
7.2 The
Purchaser shall have delivered to the Company all certificates, if any,
evidencing the shares of Series A Preferred Stock being transferred to the
Company in connection with this Agreement and any other documentation reasonably
requested by the Company and provided to the Purchaser in final form (to the
extent the Company has the ability to prepare a final form) at least three
(3)
business days before Closing to evidence the transfer of such shares of Series
A
Preferred Stock by the Purchaser to the Company.
7.3 Immediately
prior to the Closing, there shall be no person or entity that holds any shares
of the Company’s Series A Preferred Stock other than the Purchaser.
7.4 The
Purchaser shall have executed and delivered to the Company a unanimous written
consent of the sole holder of the Series A Preferred Stock approving the
Articles of Amendment.
7.5 At
the
Shareholders Meeting, the Purchaser shall have voted all of its shares of Series
A Preferred Stock to approve the transactions contemplated hereby .
SECTION
8. REGISTRATION OF THE REGISTRABLE SECURITIES; COMPLIANCE WITH THE SECURITIES
ACT.
8.1 Registration
Procedures. The
Company is obligated to do the following:
(a) Before
the date that is 4 months after the Closing Date, the Company shall prepare
and
file with the SEC one or more registration statements (the “Registration
Statement(s)”)
in
order to register with the SEC the resale by the Holders (as defined below),
from time to time, of the Registrable Securities (as defined below) through
NASDAQ or the facilities of any national securities exchange on which the
Company’s Common Stock is then traded, or in privately negotiated transactions.
The Company and the Purchaser shall reasonably cooperate to determine what
the
parties believe to be the most feasible and effective method of registering
the
offer and sale of all of the Registrable Securities. The Company shall use
its
reasonable efforts to cause such Registration Statement(s) to be declared
effective before the date that is nine months following the Closing Date;
provided, however, that if the lock-up set forth in Section 10.2 expires as
a
result of Section 10.2(z), the Company will use commercially reasonable efforts
to cause the Registration Statement(s) to be declared effective as soon as
is
commercially reasonable after such expiration. The holders of Registrable
Securities (including the Purchaser’s Permitted Transferees under Section 8.10)
are referred to herein as the “Holders.”
The
Company shall promptly notify the Holders of the effectiveness of the
Registration Statement(s). “Registrable
Securities”
shall
mean (i) the Conversion Shares, (ii) the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock issued under Section 8.9 (the
“Damages
Shares”)
and
(iii) Common Stock issued as (or issuable upon the conversion of exercise of
any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Offered Securities, the Conversion Shares or the Damages Shares (or Common
Stock
into which such Damages Shares is convertible), provided, however, securities
shall cease to be Registrable Securities on the earlier of (A) the date
that such securities are sold pursuant to the Registration Statement(s), or
(B) such time that all Registrable Securities held by a Holder can be sold
pursuant to Rule 144(k) under the Securities Act (and the Company has provided
an opinion of counsel to such effect reasonably acceptable to the Holder of
such
Registrable Securities). Each Holder shall provide the Company such information
in writing as is reasonably requested to enable the Company and its counsel
to
ascertain whether or not the Holder is eligible to sell the Offered Securities
and/or the Registrable Securities pursuant to Rule 144 of the Securities Act.
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PREFERRED
STOCK PURCHASE AGREEMENT
(b) The
Company shall prepare and file with the SEC (i) such amendments and supplements
to any Registration Statement(s) and the prospectus used in connection
therewith, and (ii) such other filings required by the SEC, in each case as
may
be necessary to keep the Registration Statement(s) continuously effective and
not misleading until the earlier of (A) the date that the holders of
Registrable Securities have completed the distribution related to the
Registrable Securities, or (B) such time that there are no longer any
Registrable Securities outstanding; provided,
however,
that at
any time, upon written notice to the Purchaser and for a period not to exceed
fifteen (15) days thereafter (the “Suspension
Period”),
the
Company may delay the filing or effectiveness of any Registration Statement(s)
or suspend the use or effectiveness of any Registration Statement(s) (and the
Holders hereby agree not to offer or sell any Registrable Securities pursuant
to
such Registration Statement(s) during the Suspension Period) if the Company
reasonably believes that the Company may, in the absence of such delay or
suspension hereunder, be required under state or federal securities laws to
disclose any corporate development the disclosure of which could reasonably
be
expected to have an adverse effect upon the Company, its shareholders, a
potentially significant transaction or event involving the Company, or any
negotiations, discussions, or proposals directly relating thereto. The Company
may extend the Suspension Period for an additional consecutive fifteen (15)
days
upon written notice to the Holders. The Company agrees to use its commercially
reasonable efforts to insure that the Suspension Period is kept to a minimum
number of days. If so directed by the Company, each Holder shall use its best
efforts to deliver to the Company (at the Company’s expense) all copies, other
than permanent file copies then in such Holder’s possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
(c) Furnish
to the Holders such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
17
PREFERRED
STOCK PURCHASE AGREEMENT
(d) Use
its
best efforts to register and qualify the securities covered by such Registration
Statement(s) under such other securities or Blue Sky laws of such jurisdictions
as shall be reasonably requested by a Holder; provided
that
the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process
in
any such states or jurisdictions, unless the Company is already subject to
service in such jurisdiction and except as required by the Securities
Act.
(e) Notify
each Holder whose Registrable Securities are covered by such Registration
Statement(s) at any time when a prospectus relating thereto is required to
be
delivered under the Securities Act of the happening of any event as a result
of
which the prospectus included in such Registration Statement(s), as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing. The
Company shall use reasonable efforts to promptly amend or supplement such
prospectus in order to cause such prospectus not to include any 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 not misleading in the light
of the circumstances then existing.
(f) Use
it
reasonable efforts to cause all such Registrable Securities registered pursuant
hereunder to be listed on NASDAQ and each other securities exchange on which
similar securities issued by the Company are then listed.
(g) Use
commercially reasonable efforts to cause the Registration Statement(s) to allow
for resales by Permitted Transferees (as such term is defined in Section 8.10)
without filing a post-effective amendment or, if possible, prospectus amendment
thereto.
8.2 Transfer
of Securities. Each
Holder, severally and not jointly, agrees that it will not effect any
disposition of the Offered Securities or Registrable Securities that would
constitute a sale within the meaning of the Securities Act, unless:
(a) (i)
pursuant to a Registration Statement(s) then in effect covering such
disposition, if such disposition is made in accordance with such Registration
Statement(s); or (ii) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a reasonably
detailed statement of the circumstances surrounding the proposed disposition,
and if reasonably requested by the Company, such Holder shall have furnished
the
Company with an opinion of counsel, reasonably satisfactory to the Company,
or
other evidence, reasonably satisfactory to the Company, that such disposition
will not require registration of such Registrable Securities under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to and in compliance with Rule 144;
and
(b) the
Company is given written notice prior to said transfer or assignment, stating
the name and address of the transferee or assignee and identifying the
Registrable Securities that are intended to be transferred or assigned and
the transferee or assignee of such rights delivers to the Company, in a
form reasonably acceptable to the Company, an agreement evidencing the
assumption of all of the rights and obligations of such Holder under this
Agreement, including the obligations set forth in Section 10.2, if applicable
to
the transferred Registrable Securities, and Section 10.1.
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PREFERRED
STOCK PURCHASE AGREEMENT
8.3 Legends.
Each
certificate representing Registrable Securities shall (unless otherwise
permitted by the provisions of the Agreement) be stamped or otherwise imprinted
with a legend substantially similar to the legend described in the Articles
of
Amendment.
8.4 Expenses
of Registration.
Except
as specifically provided herein, all expenses incurred by the Company in
complying with Section 8 hereof, including, all registration and filing
fees, printing expenses not to exceed $20,000, fees and disbursements of counsel
for the Company, reasonable and actual fees and expenses of one counsel to
the
Holders (not to exceed $7,500 in connection with the original filing thereof
(or, if such registration is on Form S-1, is an underwritten offering or there
are other unanticipated circumstances, $15,000), and, if any post-effective
amendment or prospectus amendment is required in connection therewith, an
additional $5,000 per amendment), blue sky fees and expenses, fees and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company) (collectively, the “Registration
Expenses”)
shall
be borne by the Company. All underwriting discounts and brokerage/selling
commissions applicable to a sale incurred in connection with any registrations
hereunder shall be borne by the holders of the securities so registered
pro
rata
on the
basis of the number of shares registered for resale. The Holders shall also
be
responsible, on a pro rata basis, for paying printing expenses and legal
expenses of counsel to the Holders which are not Registration Expenses pursuant
to this Section 8.4.
8.5 Indemnification. In
the
event any Registrable Securities are included in a registration statement under
this Section 8.
(a) The
Company will indemnify and hold harmless each Holder, the partners, officers
and
directors of each Holder, any underwriter (as defined in the Securities Act)
for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal
or
state law, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein
not
misleading, or (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any state securities law or any rule
or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such registration
statement; and the Company will pay as incurred to each such Holder, partner,
officer, director, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however,
that
the indemnity agreement contained in this Section 8.5 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable in any
such
case for any such loss, claim, damage, liability or action to the extent that
it
arises out of or is based upon a Violation which occurs in reliance upon and
in
conformity with written information furnished specifically for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
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STOCK PURCHASE AGREEMENT
(b) Each
Holder will, if Registrable Securities held by such Holder are included in
the
securities as to which registration, qualifications or compliance is being
effected, indemnify and hold harmless the Company, each of its directors, its
officers and each person, if any, who controls the Company within the meaning
of
the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder’s partners,
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or other such
Holder, or partner, director, officer or controlling person of such other Holder
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
specifically for use in connection with such registration; and each such Holder
will pay as incurred any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
person registering shares under such registration, or partner, officer, director
or controlling person of such other person registering shares under such
registration in connection with investigating or defending any such loss, claim,
damage, liability or action; provided,
however,
that the
indemnity agreement contained in this Section 8.5 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; provided
further,
that in
no event shall any indemnity under this Section 8.5 exceed the net proceeds
from the sale of Registrable Securities pursuant to the Registration Statement
received by such Holder.
(c) Promptly
after receipt by an indemnified party under this Section 8.5 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against
any
indemnifying party under this Section 8.5, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided,
however,
that an
indemnified party shall have the right to retain its own counsel, with the
reasonable and actual fees and expenses to be paid by the indemnifying party,
if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by
such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 8.5, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any
indemnified party otherwise than under this Section 8.5.
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STOCK PURCHASE AGREEMENT
(d) If
the
indemnification provided for in this Section 8.5 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to
any losses, claims, damages or liabilities referred to herein, the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall to
the
extent permitted by applicable law contribute to the amount paid or payable
by
such indemnified party as a result of such loss, claim, damage or liability
in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other
in
connection with the Violation(s) that resulted in such loss, claim, damage
or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided,
that in
no event shall any contribution by a Holder hereunder exceed the net proceeds
from the sale of Registrable Securities pursuant to the Registration Statement
received by such Holder.
(e) The
obligations of the Company and the Holders under this Section 8.5 shall
survive completion of any offering of Registrable Securities in a registration
statement and the termination of this Agreement. No indemnifying party, in
the
defense of any such claim or litigation, shall, except with the consent of
each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
8.6 Agreement
to Furnish Information.
In
connection with a registration in which a Holder is participating, such Holder
agrees to execute and deliver such other agreements as may be reasonably
requested by the Company or the underwriter. In addition, if requested by the
Company or the representative of the underwriters of Common Stock (or other
securities) of the Company, each Holder shall provide, within ten (10) days
of
such request, such information related to such Holder as may be required by
the
Company or such representative in connection with the completion of any public
offering of the Company’s securities pursuant to a registration statement filed
under the Securities Act.
8.7 Rule
144 Reporting. With
a
view to making available to the Holder the benefits of certain rules and
regulations of the SEC which may permit the sale of the Registrable Securities
to the public without registration, the Company agrees to use its reasonable
efforts to:
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STOCK PURCHASE AGREEMENT
(a) Make
and
keep public information available, as those terms are understood and defined
in
Rule 144 of the Securities Act or any similar or analogous rule promulgated
under the Securities Act;
(b) File
with
the SEC, in a timely manner, all reports and other documents required of the
Company under the Exchange Act; and
(c) So
long
as a Holder owns any Registrable Securities, furnish to such Holder forthwith
upon request: a written statement by the Company as to its compliance with
the
reporting requirements of said Rule 144 of the Securities Act, and of the
Exchange Act (at any time after it has become subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing it to sell
any
such securities without registration.
8.8 S-3
Eligibility; S-1 Eligibility; NASDAQ Listing.
Until
the earlier of (A) the date that the Registrable Securities are sold
pursuant to the Registration Statement(s), or (B) there are no remaining
Registrable Securities, the Company will use its reasonable efforts to (i)
meet
the requirements for the use of Form S-3 for registration of the resale by
the
Holders of the Registrable Securities and (ii) maintain the Company’s NASDAQ
listing. The Company will use its reasonable efforts to file all reports
required to be filed by the Company with the SEC in a timely manner and take
all
other reasonably necessary action so as to maintain such eligibility for the
use
of Form S-3. In addition, the Company will use its best efforts take all other
reasonably necessary action so as to maintain its eligibility for the use of
Form S-1 for registration of the resale by the Holders of the Registrable
Securities.
8.9 Liquidated
Damages.
If (i)
the Registration Statement(s) is not declared effective by the SEC on or prior
to the date that is nine months following the Closing Date or (ii) the
Registration Statement(s) is filed with and declared effective by the SEC but
thereafter ceases to be effective as to Registrable Securities at any time
thereafter, excluding any Suspension Period that does not exceed 30 days
individually or 60 days during any one-year period, the Company shall pay as
liquidated damages to each Holder an amount (the “Non-Registration
Fee”)
equal
to one percent (1%) for each calendar month (or a lesser pro rata share if
such
period is less than a full calendar month) thereafter (until there is a
Registration Cure, as defined below, with respect to such Holder) of the
Purchase Price attributable to the Registrable Securities then held by such
Holder with respect to which the Registration Statement(s) are not effective
(the “Unregistered
Shares”),
payable with respect to any calendar month on the third day of the following
calendar month; provided,
however,
the
Non-Registration Fee will be three percent (3%) if the failure to maintain
a
registration statement is directly or indirectly the result of the Company’s
fraud or gross negligence; provided,
further,
no
Holder shall be entitled to a Non-Registration Fee if the failure to register
or
maintain the Registration Statement(s) with respect to such Holder’s
Unregistered Shares relates primarily to an act or omission of Holder. A
“Registration
Cure,”
with
respect to a Holder, is the earliest to occur of the following: (x) the
Registration Statement(s) with respect to such Holder’s Registrable Securities
is declared or becomes effective; (y) such Holder’s securities cease to be
Registrable Securities pursuant to the definition of such term set forth in
this
Section 6; or (z) the Company (1) sends the Holder a notice (a “Cure
Notice”)
in
which the Company offers to purchase all of such Holder’s Registrable Securities
at a price per share equal to the Fair Market Value (as defined below) thereof
(measured as of the date of the Cure Notice), (2) deposits cash and/or Series
B
Preferred Stock equal to the aggregate purchase price therefor with a bank
or
trust corporation having aggregate capital and surplus in excess of $50,000,000,
as a trust fund for the benefit of such Holder, with irrevocable instructions
and authority to the bank or trust corporation to pay such amounts to such
Holder upon receipt of notification from the Company that such Holder has
surrendered the related share certificates to the Company pursuant to this
Section 8.9 (or lost stock affidavit therefor reasonably acceptable to the
Company) and (3) provides the Holder with an officer’s certificate, signed by
the Chief Executive Officer of the Company, to the effect that the foregoing
has
occurred. The Company shall, at its election, pay the Non-Registration Fee
with
cash or by issuing the Holders additional shares of Series B Preferred Stock;
provided, that the Common Stock into which such Series B Preferred Stock is
convertible will thereafter become classified as Registrable Securities
hereunder. Each share of Preferred Stock so issued will be deemed to have a
value equal to the Fair Market Value (as defined below) of the number of shares
of Common Stock into which such share of Preferred Stock is convertible,
measured from the first day of the calendar month in which payment occurs.
Notwithstanding the foregoing, in no event shall the aggregate amount of the
Non-Registration Fee exceed $30,000,000.
The
“Fair
Market Value”
of
a
share of Common Stock will be determined as follows:
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STOCK PURCHASE AGREEMENT
(A)
Securities not subject to restrictions on free marketability covered by clause
(B) below:
(1) if
traded
on a securities exchange or through the NASDAQ, the value shall be deemed to
be
the average of the closing prices of the securities on such quotation system
over the thirty (30) trading day period ending three (3) trading days prior
to
the date of measurement;
(2) if
actively traded over-the-counter, the value shall be deemed to be the average
of
the closing bid or sale prices (whichever is applicable) over the thirty (30)
trading day period ending three (3) trading days prior to the date of
measurement; and
(3) if
there
is no active public market, the value shall be the fair market value thereof,
as
determined by the Board of Directors of the Company (the “Board
of Directors”).
(B)
The
method of valuation of securities subject to restrictions on free marketability
(other than restrictions arising solely by virtue of a shareholder’s status as
an Affiliate or former Affiliate) shall be to effectuate an appropriate discount
from the market value, as determined by clause (A)(1), (2) or (3), so as to
reflect the approximate fair market value thereof, as determined by the Board
of
Directors.
(C)
The
holders of at least a majority of the Registrable Securities shall have the
right to challenge any determination by the Board of Directors of fair market
value pursuant hereto, in which case the determination of fair market value
shall be made by an independent appraiser selected jointly by the Board of
Directors and the challenging parties, the cost of such appraisal to be borne
equally by the Company and the challenging parties.
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STOCK PURCHASE AGREEMENT
8.10 Restrictions
on Transfer of Section 8 Rights and Obligations.
In
addition to the requirements of Section 8.2 hereof, the rights and obligations
of a Holder under this Section 8 may be transferred or assigned by a Holder
only
(i) to a transferee or assignee of not less than 10% of the Offered Securities
or 10% of the Conversion Shares or (ii) by a Holder (A) that is a
partnership to its partners or former partners in accordance with partnership
interests, (B) that is a limited liability company to its members or former
members in accordance with their interest in the limited liability company,
(C) that is a corporation to its Affiliates or majority owned subsidiaries
or (D) that is an individual to the Holder’s family member or trust for the
benefit of Holder or his or her family members or an entity whose equity owners
consist solely of the Holder and his or her family members (each, a
“Permitted
Transferee”);
provided
that in
all instances (x) the Company is given written notice prior to said transfer
or
assignment, stating the name and address of the transferee or assignee and
identifying the Registrable Securities that are intended to be transferred
or
assigned and (y) the transferee or assignee of such rights delivers to the
Company, in a form reasonably acceptable to the Company, an agreement evidencing
the assumption of all of the rights and obligations of such Holder under this
Agreement, including the obligations set forth in Section 10.2, if applicable
to
the transferred Registrable Securities, and Section 10.1.
SECTION
9. TAX
REPORTING COVENANT. The
parties agree that the Offered Securities will be treated as other than
preferred stock for purposes of Internal Revenue Code of 1986, as amended,
Section 305 (“IRC
305”).
Accordingly, the parties agree that no amount shall be currently includable
in
the income of a Holder by reason of IRC 305. The parties agree to report the
tax
consequences of the Series B Preferred Stock consistent with this
treatment.
SECTION
10. COVENANTS OF THE PURCHASER AND HOLDERS.
10.1 Prohibition
on Use of Insider Information.
The
Purchaser and each Holder understands that federal and state securities laws
prohibit trading in the Company’s securities while such Purchaser or Holder is
in the possession of “material nonpublic information” concerning the Company
and/or its Affiliates. Each Purchaser represents that it has been advised by
its
counsel of such laws and the consequences of breaking such laws. Each Purchaser
and each Holder covenants not to enter into any transactions that would violate
applicable securities laws.
10.2 Lock-up
Period.
The
Purchaser and each Holder hereby agrees that from the Closing Date until the
date that is fifteen months following the Closing Date such Holder will not
offer, sell, contract to sell, pledge or otherwise dispose of, any shares of
Series B Preferred Stock, any shares of the Company’s Common Stock or any other
securities convertible into or exchangeable or exercisable for any shares of
Common Stock (collectively, the “Securities”),
enter
into a transaction which would have the same effect, or enter into any swap,
hedge or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of the Securities, whether any such
aforementioned transaction is to be settled by delivery of the Securities or
other securities, in cash or otherwise, or publicly disclose the intention
to
make any such offer, sale, pledge or disposition (other than actions taken
by
the Holders in connection with the filing of the Registration Statement(s)
by
the Company), or to enter into any such transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of the Company.
The provisions of the foregoing sentence (w) shall not apply to permitted
transfers pursuant to Section 8.10 or the transfer of the shares of Series
A
Preferred Stock to the Company as contemplated by this Agreement, (x) shall
not
apply to transactions relating to Securities acquired (i) by the Holders prior
to the execution of this Agreement (other than shares of Series A Preferred
Stock), (ii) by the Holders in the open market after the date of this Agreement,
(y) shall expire with respect to (A) all but 25,172 of the Offered Securities
purchased by the Purchaser in exchange for the Purchaser’s transfer of its
shares of Series A Preferred Stock to the Company on the Closing Date (the
“Exchange
Shares”)
and
any Registrable Securities attributable to such number of Offered Securities
on
the Closing Date, (B) 25,172 of the Exchange Shares and any Registrable
Securities attributable to such number of Offered Securities on December 31,
2006, (C) 33,333.34 of the Offered Securities purchased by the Purchaser and
any
Registrable Securities attributable to such number of Offered Securities on
the
date that is nine months following the Closing Date and (D) 33,333.33 of the
Offered Securities purchased by the Purchaser and any Registrable Securities
attributable to such number of Offered Securities on each of the date that
is
twelve months following the Closing Date and fifteen months following the
Closing Date and (z) shall expire in its entirety upon the earliest to
occur of (1) a Liquidation (as such term is defined in the Articles of Amendment
to the Articles of Incorporation ), (2) an Automatic Conversion Date (as such
term is defined in the Articles of Amendment to the Articles of Incorporation
),
or (3) the date Purchaser gives the Company (and the Company’s transfer agent,
in Purchaser’s sole discretion) notice that it has reasonably and in good faith
concluded that a representation or warranty made by the Company herein or in
any
certificate delivered at the Closing Date was materially untrue on the date
such
representation or warranty was made by the Company and that such breach has
or
will result in at least a 20% decline in the value of Purchaser’s investment in
the Company.
24
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STOCK PURCHASE AGREEMENT
SECTION
11. TERMINATION
11.1 This
Agreement may be terminated at any time prior to the Closing Date only
by:
(a) the
mutual written consent of the Company and the Purchaser;
(b) either
the Company or the Purchaser if the transactions contemplated by this Agreement
shall not have been consummated by October 31, 2006; provided, however, that
the
right to terminate this Agreement under this Section 11.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the primary cause of the failure of the transactions
contemplated by this Agreement to occur on or before such date;
(c) either
the Company or the Purchaser if, at the Shareholders Meeting, the Required
Vote
is not obtained;
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STOCK PURCHASE AGREEMENT
(d) the
Purchaser, if the Purchaser has provided the Company notice of a Material
Adverse Effect pursuant to Section 6.6 and such Material Adverse Effect is
not
cured within 30 days after written notice thereof;
(e) by
the
Purchaser if (i) the Board of Directors shall have withdrawn, modified or
changed its recommendation that the shareholders of the Company approve the
matters to be considered at the Shareholders Meeting, (ii) the Board of
Directors shall have revoked its approval of the transactions contemplated
by
this Agreement, (iii) the Company takes any of the actions described in clauses
(x) or (y) in Section 4.9(b) after the seven-day period described in such
Section 4.9(b), (iv) the Company breaches Section 4.1, 4.5, 4.6 or 4.9 (other
than Section 4.9(a)(i)) in a manner that could have a Material Adverse Effect
on
the Company’s ability to consummate the transactions contemplated hereby and, if
such breach is capable of being cured, such breach is not cured within fifteen
(15) days after written notice thereof or (v) the Company breaches Section
4.9(a)(i); or
(f) by
the
Company if the Board of Directors shall have withdrawn, modified or changed
its
recommendation that the shareholders of the Company approve the matters to
be
considered as a result of a Superior Proposal.
The
party
or parties desiring to terminate this Agreement pursuant to any of clauses
(a)
through (f) above shall give written notice of such termination to the other
parties.
11.2 Effect
of Termination
(a) In
the
event of termination of this Agreement by either the Company or the Purchaser
as
provided in Section 11.1, all of the provisions of this Agreement shall be
deemed to terminate except the provisions set forth in this Section 11.2
and
Section 13 through Section 23.
(b) The
Company and the Purchaser agree that if this Agreement is terminated pursuant
to
Section 11.1(e) of Section 11.1(f), then the Company shall pay the Purchaser
an
amount equal to $1,300,000 (in cash by check or wire transfer within two (2)
business days of such termination) as liquidated damages. In the event that
such
payment is not made within such two-day period, the Company will also pay
Purchaser’s expenses and costs incurred in connection with collecting such
amount, including legal fees and expenses. The parties agree that the damages
upon termination of the Agreement in the circumstances referred to in Section
11.1(e) of Section 11.1(f) are not reasonably ascertainable and the payment
pursuant to this Section 11.2(b) constitute liquidated damages and not a
penalty. The Company acknowledges that the agreements contained in this Section
11.2 are an integral part of the transactions contemplated by this Agreement
and
that, without this Section 11.2(b), the Purchaser would not enter into this
Agreement. Payment of the fee under this Section 11.2(b) will not relieve the
Company from any breach of this Agreement.
SECTION
12. EXEMPTION FROM REGISTRATION; LEGEND.
The
Offered Securities and the Conversion Shares will be issued under an exemption
or exemptions from registration under the Securities Act, and are also subject
to certain rights and obligations set forth herein. Accordingly, the
certificates evidencing the Offered Securities and any Conversion Shares
issuable upon the conversion thereof shall, upon issuance, contain a legend,
substantially in the form as set forth in the Articles of Amendment to the
Articles of Incorporation .
26
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STOCK PURCHASE AGREEMENT
SECTION
13. NOTICES.
All
communications hereunder will be in writing and, (a) if sent to Purchaser,
will be mailed, delivered or faxed and confirmed to Oak Investment Partners
XI,
Limited Partnership, Attention: Xxxxx X. Xxxxxx and Xxxxxxxx Xxxxxxxxx; with
a
copy to Xxxxxx & Xxxx, LLP, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000, fax number (000) 000-0000, Attention: Xxxxxxxx X. Xxxxxx, (b) if sent
to
any Holder, will be mailed, delivered or faxed and confirmed to such Holder’s
address as set forth on the written notice delivered to the Company pursuant
to
Section 8.2(b) of this Agreement, with a copy to Oak Investment Partners XI,
Limited Partnership, Attention: Xxxxx X. Xxxxxx and Xxxxxxxx Xxxxxxxxx; and
Xxxxxx & Xxxx, LLP, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, fax
number (000) 000-0000, Attention: Xxxxxxxx X. Xxxxxx, and (c) if sent to
the Company, will be mailed, delivered or faxed and confirmed to it at 000
Xxxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx, 00000, fax number (000) 000-0000,
Attention: Xxxxx Xxxxxxxx, Chief Financial Officer, with a copy to Hunton &
Xxxxxxxx, 0000 Xxxxxxxx Xxxxxx, 00xx
Xxxxx,
Xxxxx, XX 00000, fax number (000) 000-0000, Attention: Xxxxx Xxxxx.
SECTION
14. EXPENSES. Except
as
otherwise set forth herein, the Company, on the one hand, and Purchaser, on
the
other hand, are each responsible for its own expenses associated with the
purchase and sale of the Offered Securities pursuant to the terms of this
Agreement; provided,
that,
regardless of whether the transactions contemplated by this Agreement are
consummated, the Company will pay (i) any filing fee that may be required in
connection with the filing of the Notification and Report Forms required under
the HSR Act, if any are so required, (ii) the reasonable legal fees and expenses
of Xxxxxx & Xxxx, LLP; Xxxx Xxxxx & Xxxxxxx and Xxxxxx Xxxxxxx Xxxxxxxx
& Xxxxxx P.C.; and (iii) any other reasonable out-of-pocket expenses that
Purchaser or its Affiliates incur before the Closing Date as a result of
compliance with Section 4.1 hereof (expenses incurred under (ii) and (iii)
are
referred to as the “Purchaser
Out-of-Pocket Expenses”).
The
Purchaser Out-of-Pocket Expenses shall be paid by the Company on the Closing
Date or, in the event this Agreement is terminated pursuant to Section 11,
within five business days of the date of termination.
SECTION
15. AMENDMENT AND WAIVER. Except
as
otherwise expressly provided, this Agreement may be amended, waived, discharged
or terminated only upon the written consent of the Company and the Holders
of a
majority of the Registrable Securities then outstanding. For purposes of
determining whether a majority of the Registrable Securities then outstanding
have provided the consent required by the preceding paragraph, all outstanding
shares of Series B Preferred Stock will be deemed to have been converted into
Registrable Securities in accordance with the provisions of the Articles of
Amendment. Each such amendment, waiver, discharge or termination effected in
accordance with this paragraph shall be binding upon each Holder and each future
holder of all such securities of Holder. Each Holder acknowledges that by the
operation of this paragraph, the Holders of a majority of the Registrable
Securities (assuming conversion of all outstanding shares of Series B Preferred
Stock) will have the right and power to diminish or eliminate all rights of
such
Holder under this Agreement.
27
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STOCK PURCHASE AGREEMENT
SECTION
16. SUCCESSORS.
This
Agreement will inure to the benefit of and be binding upon the parties hereto
and their respective successors and no other person will have any right or
obligation hereunder.
SECTION
17. COUNTERPARTS.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same Agreement.
SECTION
18. SURVIVAL.
The
representations, warranties, covenants and agreements made in this Agreement
shall survive any investigation made by any party hereto and the closing of
the
transactions contemplated hereby.
SECTION
19. HEADINGS. The
headings used herein
are for
reference only and shall not affect the construction of this
Agreement.
SECTION
20. SEVERABILITY. The
parties hereby agree that each provision herein shall be treated as a separate
and independent clause, and the unenforceability of any one clause shall in
no
way impair the enforceability of any of the other clauses herein.
SECTION
21. APPLICABLE LAW
AND VENUE.
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 laws. Any
dispute under this Agreement that is not settled by mutual consent shall be
finally adjudicated by any federal or state court sitting in Miami-Dade County,
Florida, and each party consents to the exclusive jurisdiction of such courts
(or any appellate court therefrom) over any such dispute. Each party further
consents to personal jurisdiction in the courts mentioned in the prior sentence.
In the event that any suit or action is instituted to enforce any provision
in
this Agreement, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation, such reasonable fees and expenses of attorneys
and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
SECTION
22. ENTIRE AGREEMENT. This
Agreement and the agreements contemplated hereby constitute the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, other than the
confidentiality agreements entered into by Parent and the Company in connection
with the transactions contemplated hereby, which shall survive the execution
and
delivery of this Agreement. The provisions of this Agreement shall supercede
and
replace any provisions of the Preferred Stock Purchase Agreement, dated as
of
September 13, 2004, by and between the Company and the Purchaser (along with
any
amendments thereto) (the “Series
A Purchase Agreement”);
provided, however, all provisions of the Series A Purchase Agreement shall
remain in full force and effect until the Closing, at which time the Series
A
Purchase Agreement shall be automatically terminated and of no further force
and
effect. If this Agreement is terminated, the Series A Purchase Agreement will
remain in full force and effect.
28
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STOCK PURCHASE AGREEMENT
SECTION
23. WAIVER OF JURY TRIAL. EACH
OF
THE COMPANY AND THE PURCHASER HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL
BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE COMPANY OR THE PURCHASER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS
AGREEMENT.
[Signature
Page Follows]
29
PREFERRED
STOCK PURCHASE AGREEMENT
In
Witness Whereof, this
Agreement is entered into by the undersigned parties as of the date first
written above.
| Very truly yours, | ||
| AIRSPAN NETWORKS, INC. | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxxxxxx | |
|
Name: Xxxx Xxxxxxxxxx |
||
| Title: President and Chief Executive Officer | ||
OAK
INVESTMENT PARTNERS XI, LIMITED
PARTNERSHIP
| /s/ Xxxxx X. Xxxxxx | |||
|
Xxxxx X. Xxxxxx |
|||
|
Managing
Member of Oak Associates XI, LLC
The
General Partner of Oak Investments Partners
XI,
Limited Partnership
|
30
PREFERRED
STOCK PURCHASE AGREEMENT
EXHIBIT
A
FORM
OF ARTICLES OF AMENDMENT
PREFERRED
STOCK PURCHASE AGREEMENT
EXHIBIT
A
ARTICLES
OF AMENDMENT
to
the
ARTICLES
OF INCORPORATION
of
AIRSPAN
NETWORKS, INC.
I,
Xxxxx
Xxxxxxxx, Chief Financial Officer of AIRSPAN
NETWORKS, INC.,
a
corporation organized and existing under the laws of the State of Washington
(the “Corporation”),
in
accordance with the provisions of Section 23B.06.010 of the Washington Business
Corporation Act, DO HEREBY CERTIFY as follows:
1. The
Board
of Directors of the Corporation (the “Board
of Directors”)
previously designated Seventy Four Thousand Two Hundred (74,200) shares of
the
authorized and unissued Preferred Stock of the Corporation as Series A Preferred
Stock, par
value
$0.0001 per share (the “Series
A Preferred Stock”).
The
Corporation has previously issued 73,000 shares of Series A Preferred Stock.
Pursuant to that certain Preferred Stock Purchase Agreement (the “Stock
Purchase Agreement”),
dated
as of July 28, 2006, by and between the Corporation and Oak Investment Partners
XI, Limited Partnership, upon the issuance of the Series B Preferred Stock
at
the closing (the “Closing”)
of the
Stock Purchase Agreement, all of the issued and outstanding shares of Series
A
Preferred Stock will be acquired by the Corporation and no shares of Series
A
Preferred Stock will be issued and outstanding.
2. The
transactions contemplated by the Purchase Agreement have been approved by
(i)
the holder of all of the outstanding shares of the Series A Preferred Stock,
(ii) the holders of a majority of the total votes cast in person or by proxy
at
a special meeting of the Company’s shareholders held on September [___],
2006
(the “Shareholders
Meeting”)
and
(iii) the
holders of a majority of the total votes cast in person or by proxy at the
Shareholders Meeting, excluding votes cast by Oak
Investment Partners XI, Limited Partnership.
3. Pursuant
to the authority conferred upon the Board of Directors by the Articles of
Incorporation of the Corporation and by Sections 23B.06.010 and 23B.06.020
of
the WBCA, effective as of August [____],
2006,
the Board of Directors adopted a resolution, which resolution was approved
by
the holder of all the outstanding shares of Series A Preferred Stock, amending
the Articles of Incorporation to create a series of shares of convertible
preferred stock, Series B, designated as “Series
B Preferred Stock”
as
follows:
“RESOLVED,
that
pursuant to the authority vested in the Board of Directors of Airspan Networks,
Inc., a corporation organized and existing under the laws of the State of
Washington (the “Corporation”),
by
the Articles of Incorporation of the Corporation (the “Articles
of Incorporation”),
the
Board of Directors does hereby amend the Articles of Incorporation to add
new
Section 4.13 to provide for the authorization and issuance of a series of
convertible preferred stock, Series B, par value $0.0001 per share, of the
Corporation, to be designated “Series
B Preferred Stock,”
initially consisting of 250,000 shares with the designations, powers,
preferences, and relative participating, optional, or other special rights,
and
the qualifications, limitations, and restrictions thereof, as follows:
4.13 SERIES
B PREFERRED STOCK
1. Designation
and Rank
(a)
250,000
shares of the preferred stock of the Corporation, par value $0.0001 per share,
shall be designated and known as the “Series B Preferred Stock.”
(b)
The
Series B Preferred Stock shall rank senior and prior to the common stock,
par
value $0.0003 per share, of the Corporation (the “Common
Stock”),
and
all other classes or series of the capital stock (other than preferred stock)
of
the Corporation (now or hereafter authorized or issued), with respect to
the
payment of any dividends, the conversion rights set forth herein and any
payment
upon liquidation or redemption. The Corporation may not issue any additional
classes or series of preferred stock with dividend, liquidation, redemption
or
conversion rights or right of payment of any kind that is senior to the Series
B
Preferred Stock, except pursuant to Section 12; provided,
however,
that the
foregoing shall not, in any way, prevent the Corporation from unilaterally
amending the Articles of Incorporation, authorizing and otherwise designating
additional shares of Series B Preferred Stock and issuing additional shares
of
Series B Preferred Stock to the then existing holders of the Series B Preferred
Stock and/or Registrable Securities (as such term is defined in the Preferred
Stock Purchase Agreement, dated July 28, 2006, between the Corporation and
the
purchaser of the Series B Preferred Stock, the “Purchase
Agreement,”
“Registrable
Securities”),
but
only to the extent that such shares of Series B Preferred Stock are being
issued
in satisfaction of Non-Registration Fees (as such term is defined in the
Purchase Agreement, “Non-Registration
Fees”).
1
2. Dividend
Rights
From
and
after the date hereof, when and if the Board of Directors declares a dividend
or
distribution payable with respect to the then-outstanding shares of Common
Stock
(other than in additional shares of Common Stock or Common Stock Equivalents
(as
defined in Section 4(e)(i) below), the
holders of the Series B Preferred Stock shall be entitled to the
amount of dividends per share in the same form as such Common Stock dividends
that would be payable on the largest number of whole shares of Common Stock
into
which a holder’s aggregate shares of Series B Preferred Stock could then be
converted pursuant to Section 4 hereof (such number to be determined as of
the
record date for the determination of holders of Common Stock entitled to
receive
such dividend).
3. Liquidation
Rights
(a)
Liquidation
Events.
The
occurrence of any of the following events shall be deemed a “Liquidation”:
(i)
any liquidation, dissolution, or winding-up of the affairs of the Corporation,
or (ii) unless, at the request of the Corporation, the holders of at least
a
majority of the Series B Preferred Stock then outstanding determine otherwise,
(W) the merger, reorganization or consolidation of the Corporation (or any
subsidiary or subsidiaries of the Corporation the assets of which constitute
all
or substantially all the assets of the business of the Corporation and its
subsidiaries taken as a whole) into or with another entity, unless, as a
result
of such transaction the holders of the Corporation’s outstanding securities
immediately preceding such merger, reorganization or consolidation own (in
approximately the same proportions, relative to each other, as immediately
before such transaction) at least a majority of the voting securities of
the
surviving or resulting entity or the direct or indirect parent entity thereof
(solely by virtue of their shares or other securities of the Corporation
or the
consideration received thereof in such a transaction), (X) the sale, transfer
or
lease (but not including a transfer or lease by pledge or mortgage to a bona
fide lender) of all or substantially all the assets of the Corporation, whether
pursuant to a single transaction or a series of related transactions (which
assets shall include for these purposes two thirds (66-2/3%) or more of the
outstanding voting interests of such of the Corporation’s subsidiaries the
assets of which constitute all or substantially all the assets of the
Corporation and its subsidiaries taken as a whole), (Y) the sale, transfer
or
lease (but not including a transfer or lease by pledge or mortgage to a bona
fide lender), whether in a single transaction or pursuant to a series of
related
transactions, of all or substantially all the assets of any of the Corporation’s
subsidiaries the assets of which constitute all or substantially all of the
assets of the Corporation and such subsidiaries taken as a whole, or the
liquidation, dissolution or winding up of such of the Corporation’s subsidiaries
the assets of which constitute all or substantially all of the assets of
the
Corporation and such subsidiaries taken as a whole or (Z) any transaction
or
series of related transactions in which securities of the Corporation
representing 50% or more of the combined voting power of the Corporation’s then
outstanding voting securities are acquired by any person, entity or group
(as
the term group is defined and interpreted under Section 13(d)(3) of the Exchange
Act of 1934, as amended).
2
(b)
Liquidation
Preference.
(i)
In
the
event of any Liquidation, whether voluntary or involuntary, before any payment
of cash or distribution of other property shall be made to the holders of
Common
Stock, or any other class or series of stock subordinate in liquidation
preference to the Series B Preferred Stock, the holders of the Series B
Preferred Stock shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders, with
respect
to each share of Series B Preferred Stock held by such holder, $290.00 (as
appropriately adjusted for any combinations, divisions, or similar
recapitalizations with respect to the Series B Preferred Stock after the
Original Issue Date (as defined below), the “Original
Issue Price”)
and
all accumulated or accrued and unpaid dividends thereon (collectively, the
“Series
B Liquidation Preference”).
(ii)
If,
upon
any Liquidation, the assets of the Corporation available for distribution
to its
stockholders are insufficient to pay the holders of the Series B Preferred
Stock
the full amounts to which they are entitled pursuant to clause (b)(i) above,
the
holders of the Series B Preferred Stock shall share pro
rata
in any
distribution of assets in proportion to the respective amounts which would
be
payable to the holders of the Series B Preferred Stock in respect of the
shares
held by them if all amounts payable to them in respect of such were paid
in full
pursuant to clause (b)(i) above.
(iii)
After
the
distributions described in clause (b)(i) or (b)(ii) above have been paid,
subject to the rights of any other class or series of capital stock of the
Corporation that may from time to time come into existence, the remaining
assets
of the Corporation available for distribution to stockholders shall be
distributed among the holders of Common Stock pro
rata
based on
the number of shares of Common Stock held by each.
(iv)
If
the
holders of the Series B Preferred Stock would receive a greater return in
a
Liquidation by converting such holders’ shares of Series B Preferred Stock into
Common Stock (in the good faith judgment of the Board of Directors, unless
holders of a majority of the outstanding shares of Series B Preferred Stock
object, in which case the conclusion of such holders will govern), then such
shares will be deemed to be automatically converted into Common Stock
immediately before the effectiveness of such Liquidation.
(c)
Non-Cash
Distributions.
If any
distribution to be made pursuant to this Section 3 is to be paid other than
in
cash or Common Stock or Common Stock Equivalents, the value of such distribution
will be deemed its fair market value as determined in good faith by the Board
of
Directors. Any securities shall be valued as follows:
(i)
Securities
not subject to restrictions on free marketability covered by clause (ii)
below:
(1)
if
traded
on a securities exchange, the value shall be deemed to be the average of
the
closing prices of the securities on such quotation system over the thirty
(30)
trading day period ending three (3) trading days prior to the occurrence
of the
Liquidation;
(2) if
actively traded over-the-counter, the value shall be deemed to be the average
of
the closing bid or sale prices (whichever is applicable) over the thirty
(30)
trading day period ending three (3) trading days prior to the occurrence
of the
Liquidation; and
(3)
if
there
is no active public market, the value shall be the fair market value thereof,
as
determined by the Board of Directors.
(ii)
The
method of valuation of securities subject to restrictions on free marketability
(other than restrictions arising solely by virtue of a stockholder’s status as
an affiliate or former affiliate) shall be to effectuate an appropriate discount
from the market value, as determined by clause (i)(1), (2) or (3) of this
Section 3(c), so as to reflect the approximate fair market value thereof,
as
determined by the Board of Directors.
3
(iii)
The
holders of at least a majority of the outstanding Series B Preferred Stock
shall
have the right to challenge any determination by the Board of Directors of
fair
market value pursuant to this Section 3(c), in which case the determination
of
fair market value shall be made by an independent appraiser selected jointly
by
the Board of Directors and the challenging parties, the cost of such appraisal
to be borne equally by the Corporation and the challenging parties.
4. Conversion
Rights
The
holders of the Series B Preferred Stock shall have conversion rights as follows
(the “Conversion
Right”):
(a)
Conversion
Price.
The
“Conversion
Price”
shall
initially be $2.90 per share and shall be subject to adjustment as set forth
below in Sections 4(e) and 4(f).
(b)
Automatic
Conversion.
If the
closing price for the shares of the Corporation’s Common Stock (trading on the
Nasdaq Global Market or other national exchange or market) exceeds $9.00
per
share (as adjusted for events described in Sections 4(e)(i), 4(e)(ii) and
4(e)(iii) below) for any thirty consecutive trading day period that begins
after
[insert closing date], 2008, then, upon such occurrence, each share of Series
B
Preferred Stock shall be automatically converted into such number of shares
of
fully paid and non-assessable shares of Common Stock as is determined by
dividing (x) the Original Issue Price by (y) the Conversion Price then in
effect
(an “Automatic
Conversion”).
The
date of such conversion is herein referred to as the “Automatic
Conversion Date.”
(c)
Optional
Conversion.
Each of
the holders of the Series B Preferred Stock shall have the right, at any
time,
to convert the shares of Series B Preferred Stock held by such holder into
that
number of shares of Common Stock into which such shares are convertible pursuant
to Section 4(b) (an “Optional
Conversion”).
In
the event of any Optional Conversion, the date of such conversion shall be
referred to as the “Optional
Conversion Date.”
(d)
Mechanics
of Conversion.
Before
any holder of Series B Preferred Stock shall be entitled to convert the same
into full shares of Common Stock, and to receive certificates therefor, it
shall
either (A) surrender the subject Series B Preferred Stock certificate or
certificates therefor, duly endorsed, at the office of the Corporation or
of any
transfer agent for the Series B Preferred Stock or (B) notify the Corporation
or
its transfer agent that such certificates have been lost, stolen or destroyed
and execute an agreement reasonably satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection with such
certificates, and shall give written notice to the Corporation at such office
that he elects to convert the same; provided,
however,
that on
an Automatic Conversion Date, the outstanding shares of Series B Preferred
Stock
shall be converted automatically without any further action by the holders
of
such shares and whether or not the certificates representing such shares
are
surrendered to the Corporation or its transfer agent; provided
further,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable in connection therewith unless
either the certificates evidencing such shares of Series B Preferred Stock
are
delivered to the Corporation or its transfer agent as provided above, or
the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement reasonably
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates. On an Automatic Conversion
Date, each holder of record of shares of Series B Preferred Stock shall be
deemed to be the holder of record of the Common Stock issuable upon such
conversion, notwithstanding that the certificates representing such shares
of
Series B Preferred Stock shall not have been surrendered at the office of
the
Corporation, that notice from the Corporation shall not have been received
by
any holder of record of shares of Series B Preferred Stock, or that the
certificates evidencing such shares of Common Stock shall not then be actually
delivered to such holder.
4
The
Corporation shall, as soon as practicable after such delivery, or after such
agreement and indemnification, issue and deliver at such office to such holder
of Series B Preferred Stock, a certificate or certificates for the number
of
shares of Common Stock to which he shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result
of
a conversion into fractional shares of Common Stock in accordance with Section
8, plus any declared and unpaid dividends on the converted Series B Preferred
Stock. A conversion, other than an Automatic Conversion, shall be deemed
to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series B Preferred Stock to be converted (or on
such
later date requested by the holder), and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date; provided,
however,
that if
the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act of 1933, as amended, or a merger,
sale, financing, or liquidation of the Corporation or other event, the
conversion may, at the option of any holder tendering Series B Preferred
Stock
for conversion, be conditioned upon the closing of such transaction or upon
the
occurrence of such event, in which case the person(s) entitled to receive
the
Common Stock issuable upon such conversion of the Series B Preferred Stock
shall
not be deemed to have converted such Series B Preferred Stock until immediately
prior to the closing of such transaction or the occurrence of such event.
(e)
Certain
Adjustments.
The
following adjustments shall be made to the Conversion Price:
(i)
Adjustment
for Common Stock Dividends and Distributions.
If, at
any time after the original issue date of the Series B Preferred Stock (the
“Original
Issue Date”),
the
Corporation makes, or fixes a record date for the determination of holders
of
Common Stock entitled to receive, a dividend or other distribution payable
in
additional shares of Common Stock or Common Stock Equivalents, in each such
event the Conversion Price that is then in effect shall be appropriately
decreased as of the time of such issuance or, in the event such record date
is
fixed, as of the close of business on such record date; provided,
however,
that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion
Price
shall be recomputed accordingly as of the close of business on such record
date
and thereafter the Conversion Price shall be adjusted pursuant to this Section
4(e)(i) to reflect the actual payment of such dividend or distribution.
A
“Common
Stock Equivalent”
shall
mean each share of Common Stock into which securities or property or rights
are
convertible, exchangeable or exercisable for or into shares of Common Stock,
or
otherwise entitle the holder thereof to receive directly or indirectly, any
of
the foregoing.
(ii)
Adjustments
for Stock Splits, Stock Subdivisions and Combinations.
If, at
any time after the Original Issue Date, the Corporation subdivides or combines
the Common Stock, (A) in the case of a subdivision (including a stock split),
the Conversion Price in effect immediately prior to such event shall be
proportionately decreased and (B) in the case of a combination (including
a
reverse stock split), the Conversion Price in effect immediately prior to
such
event shall be proportionately increased. Any adjustment under this Section
4(e)(ii) shall become effective at the time the subdivision or combination
becomes effective.
(iii)
Adjustments
for Reclassification, Reorganization and Consolidation.
In case
of (A) any reclassification, reorganization, change or conversion of securities
of the class issuable upon conversion of the Series B Preferred Stock (other
than a change in par value, or from par value to no par value) into other
shares
or securities of the Corporation, or (B) any merger or consolidation of the
Corporation with or into another entity (other than a Liquidation or a merger
or
consolidation with another entity in which the Corporation is the acquiring
and
the surviving entity and that does not result in any reclassification or
change
of outstanding securities issuable upon conversion of the Series B Preferred
Stock) each holder of shares of Series B Preferred Stock shall have the right
to
receive, in lieu of the shares of Common Stock otherwise issuable upon the
conversion of its shares of Series B Preferred Stock (and accumulated or
accrued
and unpaid dividends then-outstanding thereunder) in accordance with Section
4(b), the kind and amount of shares of stock and other securities, money
and
property receivable upon such reclassification, reorganization, change, merger
or consolidation upon conversion by a holder of the maximum number of shares
of
Common Stock into which such shares of Series B Preferred Stock could have
been
converted immediately prior to such reclassification, reorganization, change,
merger or consolidation, all subject to further adjustment as provided herein
or
with respect to such other securities or property by the terms thereof. The
provisions of this Section 4(e)(iii) shall similarly attach to successive
reclassifications, reorganizations, changes, mergers and consolidations.
5
(f) Adjustment
for Issuances of Additional Shares of Common Stock at Price Below Conversion
Price.
To the
extent that, after the Original Issue Date, (i) the Corporation issues
Additional Shares of Common Stock (as defined below) and (ii) such issuance
is
at an Effective Price (as defined below) per share less than the Conversion
Price then in effect, then the Conversion Price shall be adjusted by
multiplying the Conversion Price then in effect by a fraction, the numerator
of
which shall be (x) the sum of (A) the number of shares of Common Stock
(on an as converted, fully diluted basis assuming exercise of all then
outstanding Options (as defined below) and, thereafter, conversion of all
then
outstanding Convertible Securities (as defined below)(a “Fully
Diluted Basis”))
outstanding on the record date of such issuance or sale plus (B) the
quotient obtained by dividing the Total Consideration (as defined below)
by the
Conversion Price then in effect, and the denominator of which shall be
(y) the number of shares of Common Stock (on a Fully Diluted Basis)
outstanding on the record date of such issuance or sale plus the maximum
number
of Additional Shares of Common Stock issued
by
the Company or deemed to be issued pursuant to this Section 4(f) in connection
with such issuance or sale.
(i) For
the
purpose of making any adjustment required under Section 4(f), the consideration
received by the Corporation for any issue or sale of securities shall (A)
to the
extent it consists of cash, be computed at the net amount of cash received
by
the Corporation after deduction of any underwriting or similar commissions,
compensation or concessions paid or allowed by the Corporation in connection
with such issue or sale but without deduction of any expenses payable by
the
Corporation, (B) to the extent it consists of property other than cash, be
computed at the fair market value of that property as determined in good
faith
by the Board of Directors, and (C) if Additional Shares of Common Stock,
Convertible Securities or Options are issued or sold together with other
stock
or securities or other assets of the Corporation for a consideration which
covers both, be computed as the portion of the consideration so received
that
may be reasonably determined in good faith by the Board of Directors to be
allocable to such Additional Shares of Common Stock, Convertible Securities
or
Options; provided, however, that the holders of at least a majority of the
outstanding shares of Series B Preferred Stock shall have the right to challenge
any determination by the Board of Directors of fair market value pursuant
to
this Section 4(f)(i), in which case the determination of fair market value
shall
be made by an independent appraiser selected jointly by the Board of Directors
and the challenging parties, the cost of such appraisal to be borne equally
by
the Corporation and the challenging parties.
(ii) For
the
purpose of the adjustment required under Section 4(f), if the Corporation
issues
or sells (A) stock or other securities convertible into Additional Shares
of
Common Stock (such convertible stock or securities being herein referred
to as
"Convertible
Securities")
or (B)
rights, warrants or options for the purchase of Additional Shares of Common
Stock or Convertible Securities (“Options”)
and if
the Effective Price of such Additional Shares of Common Stock is less than
the
Conversion Price, in each case the Corporation shall be deemed to have issued
at
the time of the issuance of such Options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares
an
amount equal to the total amount of the consideration, if any, received by
the
Corporation for the issuance of such Options or Convertible Securities, plus,
in
the case of such Options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such Options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable
to
the Corporation (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities) upon the conversion thereof; provided
that if in the case of Convertible Securities the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Corporation shall be deemed to have received
the
minimum amounts of consideration without reference to such clauses; provided
further that if the minimum amount of consideration payable to the Corporation,
or the maximum number of Additional Shares of Common Stock issuable, upon
the
exercise or conversion of Options or Convertible Securities is reduced over
time
or on the occurrence or non-occurrence of specified events other than by
reason
of antidilution adjustments similar to those set forth in this Section 4(f),
the
Effective Price shall be recalculated using the figure to which such minimum
amount of consideration or maximum number of Additional Shares of Common
Stock
is reduced; provided further that if the minimum amount of consideration
payable
to the Corporation, or the maximum number of Additional Shares of Common
Stock
issuable, upon the exercise or conversion of such Options or Convertible
Securities is subsequently increased, the Effective Price shall be again
recalculated using the increased minimum amount of consideration payable
to the
Corporation, or maximum number of Additional Shares of Common Stock issuable,
upon the exercise or conversion of such Options or Convertible Securities.
No
further adjustment of the Conversion Price, as adjusted upon the issuance
of
such Options or Convertible Securities, shall be made as a result of the
actual
issuance of Additional Shares of Common Stock on the exercise of any such
Options or the conversion of any such Convertible Securities. If any such
Options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Conversion Price,
as
adjusted upon the issuance of such Options or Convertible Securities, shall
be
readjusted to the Conversion Price which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such Options or rights of conversion of
such
Convertible Securities, and such Additional Shares of Common Stock, if any,
were
issued or sold for the consideration actually received by the Corporation
upon
such exercise, plus the consideration, if any, actually received by the
Corporation for the granting of all such Options, whether or not exercised,
plus
the consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by
the
Corporation (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) on the conversion of such Convertible
Securities.
6
For
purposes of this Section 4(f), "Additional
Shares of Common Stock"
shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this Section 4(f) after the Original Issue Date, other than (A)
Common
Stock issued upon the exercise of Options
or upon conversion of Convertible Securities outstanding
as of the Original Issue Date; (2) Common Stock issued upon conversion of
Series
B Preferred Stock issued pursuant to the Purchase Agreement or as payment
of
Non-Registration Fees; (3) Common Stock issued or issuable as a dividend
or
distribution on Preferred Stock or pursuant to any event for which adjustment
is
made to the Conversion Price pursuant hereto; (4) Common Stock or other
securities of the Company issued or issuable in connection with: (i) the
acquisition of another entity or business by the Corporation by merger, share
exchange, purchase of substantially all of the assets or other reorganization
or
pursuant to a joint venture agreement; or (ii) the acquisition of the
Corporation by another corporation or business entity by merger, share exchange,
purchase of substantially all of the assets or other reorganization or pursuant
to a joint venture agreement, the primary purpose of which is not capital
raising; (5) up to 5,000,000 shares
of
Common Stock and/or Options, and the Common Stock issued or issuable pursuant
to
such Options, to employees, officers or directors of, or consultants or advisors
to the Company or any subsidiary pursuant to stock purchase or equity incentive
plans or other arrangements that are approved by the Board
(as
appropriately adjusted for any combinations, divisions, or similar
recapitalizations affecting the Common Stock after the Original Issue Date);
and
(6) any
other
issuances approved by the holders of a majority of the Series B Preferred
Stock
then outstanding.
The
"Effective
Price"
of
Additional Shares of Common Stock shall mean the quotient determined by dividing
the total number of Additional Shares of Common Stock issued or sold, or
deemed
to have been issued or sold by the Company under this Section 4(f), into
the
aggregate consideration received, or deemed to have been received by the
Company
for such issue under this Section 4(f), for such Additional Shares of Common
Stock (the “Total
Consideration”)
7
5.
Other
Distributions.
In
the
event the Corporation provides the holders of its Common Stock with
consideration that is not otherwise addressed in Section 2 or Section 4
(including, without limitation, declaring a distribution payable in securities,
assets, cash or evidences of indebtedness issued by other persons or the
Corporation (excluding cash dividends declared and paid by the Corporation
out
of retained earnings and excluding any distribution for which an adjustment
to
the Conversion Price occurs pursuant to Section 4(e))), then, in each such
case,
the holders of the Series B Preferred Stock shall be entitled to a pro
rata
share of
any such distribution as though such holders were holders of the number of
shares of Common Stock of the Corporation as though the Series B Preferred
Stock
had been converted in whole as of the record date fixed for the determination
of
the holders of Common Stock of the Corporation entitled to receive such
distribution.
6.
Recapitalizations.
If
at any
time there occurs a recapitalization of the Common Stock (other than a
Liquidation or a subdivision, combination, or merger or sale of assets provided
for in Section 4(e)(i)-(iii) hereof) the holders of the Series B Preferred
Stock
shall be entitled to receive upon conversion of the Series B Preferred Stock
the
number of shares of capital stock or other securities or property of the
Corporation or otherwise to which a holder of the Common Stock deliverable
upon
conversion would have been entitled on such recapitalization. In any such
case,
appropriate adjustment shall be made in the application of the provisions
of
Section 4 hereof with respect to the rights of the holders of the Series
B
Preferred Stock after the recapitalization to the end that the provisions
of
Section 4 hereof (including adjustment of the Conversion Price then in effect
and the number of shares purchasable upon conversion of the Series B Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
7.
No
Impairment.
The
Corporation will not, by amendment of the Articles of Incorporation or through
any reorganization, recapitalization, transfer of assets, consolidation,
merger,
dissolution, issuance or sale of securities or any other voluntary action,
avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times
in
good faith assist in the carrying out of all the provisions hereof.
8.
No
Fractional Shares and Certificate as to Adjustments.
(a)
No
fractional shares of Common Stock will be issued upon the conversion of any
share or shares of the Series B Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share
of
Series B Preferred Stock by a holder shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would
result in the issuance of a fraction of a share of Common Stock, the Corporation
shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to such fraction multiplied
by the
closing price of the Corporation’s Common Stock on the Nasdaq Global Market (or
any other national securities exchange on which the Common Stock is then
traded)
on the day immediately preceding the conversion. All calculations under Section
4 hereof and this Section 8(a) shall be made to the nearest cent or to the
nearest share, as the case may be.
(b)
Upon
the
occurrence of each adjustment or readjustment of the Conversion Price pursuant
to Section 4 hereof, the Corporation, at its expense, shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of shares of Series B Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall,
upon
the written request at any time of any holder of Series B Preferred Stock,
use
its reasonable best efforts to furnish or cause to be furnished to such holder
a
like certificate setting forth (i) such adjustment or readjustment, (ii)
the
Conversion Price at the time in effect, and (iii) the number of shares of
Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series B Preferred Stock.
8
9.
Reservation
of Stock Issuable Upon Conversion.
The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting
the
conversion of the shares of the Series B Preferred Stock, such number of
its
shares of Common Stock that shall from time to time be sufficient to effect
the
conversion of all outstanding shares of the Series B Preferred Stock; and
if at
any time the number of authorized but unissued shares of Common Stock not
otherwise reserved for issuance shall not be sufficient to effect the conversion
of all then outstanding shares of the Series B Preferred Stock, the Corporation
shall take such corporate action that may, in the opinion of its counsel,
be
necessary to increase its authorized but unissued shares of Common Stock
to such
number of shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to its Articles of Incorporation.
10.
Notices.
Any
notice required by the provisions hereof to be given to the holders of shares
of
Series B Preferred Stock shall be given in writing and shall be deemed to
have
been given (i) in the case of personal or hand delivery, on the date of such
delivery, (ii) in the case of an internationally-recognized overnight delivery
courier, on the second business day after the date when sent, (iii) in the
case
of mailing, on the fifth business day following that day on which the piece
of
mail containing such communication is posted and (iv) in the case of facsimile
transmission, the date of telephone confirmation of receipt.
11.
Voting
Rights.
(a) Election
of Directors.
(i) So
long
as (i) Oak Investment Partners XI, Limited Partnership (or an affiliated
fund)
(the “Initial
Holder”)
is the
holder of at least a majority of the issued and outstanding shares of Series
B
Preferred Stock (the “Majority
Holder”),
but
in no event at any time that the Initial Holder is not the Majority Holder,
(ii)
as of the record date for determining the shareholders entitled to vote at
the
meeting, the number of shares of Common Stock into which the then outstanding
shares of Series B Preferred Stock would be convertible based on the Conversion
Price in effect represents at least fifteen percent (15%) of the total issued
and outstanding shares of Common Stock of the Corporation (assuming conversion
of all shares of Series B Preferred Stock, but without giving effect to
conversion or exercise of any other outstanding Convertible Securities or
Options or warrants) and (iii) the Majority Holder has not sent the Corporation
the irrevocable notice identified in Section 11(a)(viii) below, in the election
of directors of the Corporation, the holders of the Series B Preferred, voting
separately as a single series to the exclusion of all other classes and series
of the Corporation's capital stock and with each share of Series B Preferred
Stock entitled to one vote, shall be entitled at an annual or special meeting
of
the shareholders called for such purpose to elect one director to serve as
a
member of the Corporation's Board of Directors (the “Series
B Director”),
until
his successor is duly elected by the holders of the Series B Preferred, subject
to prior death, resignation, retirement, disqualification, or removal or
termination of term of office in accordance with this Section 11(a). The
Series
B Director so elected shall be in addition to the directors elected by the
holders of the Common Stock of the Corporation, and shall in accordance with
the
Corporation's bylaws increase the maximum number of directors otherwise
permitted pursuant to the Corporation's bylaws.
(ii) Initial
Appointment.
Upon
the Original Issue Date, the vacancy resulting from the directorship newly
created hereby shall be filled by a vote of the other directors on the Board
of
Directors as directed by the Initial Holder.
9
(ii) Subsequent
Designation and Election.
At any
time that the holders of Series B Preferred are entitled to elect a Series
B
Director pursuant to Section 11(a)(i) above, the individual designated by
the
Majority Holder shall be elected by the holders of the Series B Preferred
as the
Series B Director and all holders of Series B Preferred shall vote their
Shares
in such a manner to effect the election of the Series B Director designed
by the
Majority Holders.
(iii) Resignation;
Termination of Term; Removal; and Vacancies.
(A) Resignation.
The
Series B Director may resign from the Board of Directors at any time by giving
written notice to the Corporation at its principal executive office. The
resignation is effective without acceptance when the notice is given to the
Corporation, unless a later effective time is specified in the
notice.
(B) Termination
of Term of Office.
So long
as the Initial Holder is the Majority Holder, the term of office of the Series
B
Director may be terminated only by the Majority Holder. The term of office
of
the Series B Director shall automatically terminate on the date on which
the
Initial Holder is no longer the Majority Holder.
(C) Removal.
The
Series B Director may be removed only by (I) a written direction of removal
delivered to the Corporation by the Majority Holder, (II)
as
set forth in Section 11(a)(viii) or (III) death or resignation (by written
or
email notice to the Secretary of the Corporation) of the Series B
Director.
(E) Vacancies.
In the
event of a vacancy on the Board resulting from the death, disqualification,
resignation, retirement or termination of term of office of the Series B
Director designated by the Majority Holder, the resulting vacancy shall be
filled by a representative designated in writing to the Corporation by the
Majority Holder, until the next annual or special meeting of the shareholders
(and at such meeting, such representative, or another representative designated
by the Majority Holder, will be elected to the Board in the manner described
in
this Section 11(a)). If the Majority Holder fails or declines to fill the
vacancy, then the directorship shall remain open until such time as the Majority
Holder elects to fill it with a representative designated
hereunder.
(v) Fees
& Expenses.
The
Series B Director shall be entitled to all fees, equity awards, other
compensation and reimbursement of expenses paid to Board of Directors members
who are not employees of the Corporation or its subsidiaries.
(vi) Reporting
Information.
The
Majority Holders shall provide the Corporation with all necessary assistance
and
information related
to the Series B Director that is required (or would be required if the
Corporation were subject to Regulation 14A under the Securities Exchange
Act of
1934, as amended) to be disclosed in solicitations of proxies or otherwise,
including such person's written consent to being named in the proxy statement
(if applicable) and to serving as a director if elected.
(vii) Voting
Agreement.
The
holders of Series B Preferred intend the provisions of this Section 11(a)
to be
enforceable as a shareholder voting agreement in accordance with the provisions
of the WBCA.
10
(viii) Irrevocable
Forfeiture of Rights.
The
Majority Holder may at any time irrevocably forfeit its right to appoint
a
director under this Section 11(a) at any time by giving written notice to
the
Corporation of its intention to forfeit such rights. Immediately following
such
irrevocable notice, the Series B Director will resign from the Board of
Directors. If he or she does not so immediately resign, he or she may be
removed
at any time by a vote of a majority of the other members of the Board of
Directors.
(b) Other
Voting Rights. Holders
of the Series B Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the holders of the Corporation’s Common Stock, including
with respect to the election of directors of the Corporation, on an as if
converted basis based on the Voting Conversion Rate (defined below) in effect
on
the record date of such vote. Each share of Series B Preferred Stock shall
initially be entitled to cast 81 votes (as adjusted from time to time hereunder,
the “Voting
Conversion Rate”).
The
Voting Conversion Rate shall be appropriately adjusted (i.e. the Voting
Conversion Rate will be adjusted upwards as the Conversion Price is adjusted
downwards and vice versa) if the Conversion Price is adjusted from time to
time
pursuant to Sections 4(e)(i), 4(e)(ii) and 4(e)(iii) above. For purposes
of
clarification, in no circumstances, shall the Voting Conversion Rate be adjusted
upon the occurrence of an event which would cause the Conversion Price to
be
adjusted pursuant to Section 4(f). Notwithstanding the voting group rights
set
forth in Section 23B.11.035 of the WBCA, holders of Series A Preferred Stock
will not have, by virtue of the WBCA or this Section 11, the right to vote
separately as a series on any proposed plan of merger or plan of share exchange.
Except as otherwise provided herein, to the maximum extent permitted by law,
holders of Series A Preferred Stock will not have any rights to vote separately
as a series with respect to any matter submitted to a vote of the holders
of the
Corporation’s outstanding securities.
12. Protective
Provisions.
(a) So
long
as any shares of Series B Preferred Stock are outstanding, the Corporation
shall
not (either directly or indirectly by merger, consolidation, reclassification
or
similar transaction) without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the
then-outstanding shares of Series B Preferred Stock, voting separately as
a
series:
(i)
amend
its
Articles of Incorporation, Bylaws or other governing documents so as to (i)
increase the number of authorized shares of the Corporation’s preferred stock or
(ii) adversely change the rights, preferences or privileges of the Series
B
Preferred Stock or any holder thereof;
provided,
however,
that the
authorization and issuance of additional shares of Common Stock, and creation
of
any series of preferred stock (or issuing shares under any such series) that
is
junior in dividends, liquidation preference, redemption, conversion and payment
rights and otherwise to the Series B Preferred Stock shall not be deemed
to
adversely change the rights, preferences or privileges of the Series B Preferred
Stock; provided further,
that
the foregoing shall not, in any way, prevent the Corporation from unilaterally
amending the Articles of Incorporation, authorizing and otherwise designating
additional shares of Series B Preferred Stock and issuing additional shares
of
Series B Preferred Stock to the then existing holders of the Series B Preferred
Stock and/or Registrable Securities, but only to the extent that such shares
of
Series B Preferred Stock are being issued in satisfaction of Non-Registration
Fees.
(ii)
create,
authorize, designate, offer, sell or issue any equity security (or security
convertible into or exchangeable for an equity security) that is senior to
or
pari
passu with
the
Series B Preferred Stock (including any Series B Preferred Stock other than
pursuant to the Purchase Agreement) with respect to voting rights, dividends,
liquidation preference or conversion rights; provided,
however,
that
the
foregoing shall not, in any way, prevent the Corporation from authorizing,
designating, offering, selling or issuing any Common Stock or any series
of
preferred stock (or issuing shares under any such series) that is pari
passu with
the
Series B Preferred Stock with respect to voting rights and/or dividends provided
that such Common Stock or series of preferred stock is junior in liquidation
preference to the Series B Preferred Stock; provided
further,
that
the foregoing shall not, in any way, prevent the Corporation from unilaterally
amending the Articles of Incorporation, authorizing and otherwise designating
additional shares of Series B Preferred Stock and issuing additional shares
of
Series B Preferred Stock to the then existing holders of the Series B Preferred
Stock and/or Registrable Securities, but only to the extent that such shares
of
Series B Preferred Stock are being issued in satisfaction of Non-Registration
Fees.
(iii) authorize,
offer, sell or issue any shares of Series A Preferred Stock.
11
(iv)
create
any new debt instrument or bank line or increase any existing bank line or
debt
obligation (or similar arrangement pursuant to which the Corporation is or
becomes indebted, but specifically excluding trade payables in the ordinary
course of business and specifically excluding capital lease lines), so that
the
Corporation’s total indebtedness pursuant to such instruments, lines or
arrangements entered into after the Original Issue Date exceeds $10,000,000
in
the aggregate; or
(v) declare
or pay any Distribution (as defined below) with respect to any capital stock
of
the Corporation.
(b) For
purposes of this Section 12, “Distribution”
shall
mean the transfer of cash or other property without consideration, whether
by
way of dividend or otherwise, other than dividends on Common Stock payable
in
Common Stock, or the purchase or redemption of shares of the Corporation
for
cash or property other than repurchases of Common Stock issued to or held
by
employees, officers, directors or consultants of the Corporation or its
subsidiaries upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase, provided such agreements
either exist on the Original Issue Date or are approved by holders of a majority
of the Series B Preferred Stock outstanding at the time such agreements become
binding or at the time of such repurchase.
13.
Legend.
The
Series B Preferred Stock and any underlying shares of Common Stock will be
issued under an exemption or exemptions from registration under the Act and
are
subject to certain restrictions on transfer pursuant to the terms of the
Purchase Agreement. Accordingly, the certificates evidencing the Series B
Preferred Stock and the underlying Common Stock shall, upon issuance, contain
a
legend, substantially in the form as follows:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS AND NO
INTEREST HEREIN MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
(1) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE
UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) SUCH SECURITIES ARE
TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT (OR ANY SUCCESSOR
RULE) OR (3) THE ISSUER OF THESE SECURITIES SHALL HAVE RECEIVED AN OPINION
OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
ISSUER
THAT NO VIOLATION OF THE ACT OR SIMILAR STATE SECURITIES LAWS WILL BE INVOLVED
IN SUCH TRANSFER.
THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS AND AGREEMENTS
CONTAINED IN, AND, UNTIL SUCH RESTRICTIONS EXPIRE, MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, ENCUMBERED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT UPON COMPLIANCE
WITH, THE PROVISIONS OF THAT CERTAIN PREFERRED STOCK PURCHASE AGREEMENT DATED
AS
OF JULY 28, 2006, BY AND BETWEEN THE INITIAL HOLDER AND THE CORPORATION.
BY ACCEPTANCE OF THE SHARES OF CAPITAL STOCK EVIDENCED BY THIS CERTIFICATE,
THE
HOLDER AGREES TO BE BOUND BY SAID PURCHASER AGREEMENT AND ALL AMENDMENTS
THERETO. A
COPY OF
SUCH PURCHASE AGREEMENT HAS BEEN FILED AT THE OFFICE OF THE CORPORATION
14.
Status
of Converted Stock.
In
the
event any shares of Series B Preferred Stock shall be converted pursuant
to
Section 4 hereof or redeemed pursuant to Section 15 hereof, the shares so
converted or redeemed shall be canceled and shall not be reissuable by the
Corporation.
12
15.
Optional
Redemption.
(a) At
any
time after [insert closing date], 2011, subject to Section 15(e), this
Corporation may redeem, out of funds legally available therefor, in whole
or in
increments of at least 15% of the shares of Series B Preferred Stock that
have
not been converted into Common Stock pursuant hereto before the time of such
redemption (the date of such redemption being referred to herein as the
“Redemption
Date”).
The
Corporation shall redeem the shares of Series B Preferred Stock by paying
in
cash an amount per share equal to $362.50 (as appropriately adjusted for
any
combinations, divisions, or similar recapitalizations affecting the Series
B
Preferred Stock after the Original Issue Date), plus an amount equal to all
declared and unpaid dividends thereon (the “Redemption
Price”).
Any
partial redemptions must be effected pro rata among the holders of Series
B
Preferred Stock, unless the affected holders consent otherwise. The Corporation
may exercise its redemption right set forth in this Section 15 up to five
(5)
separate times.
(b) At
least
thirty (30), but no more than forty five (45) days prior to the Redemption
Date,
written notice shall be mailed, first class postage prepaid, to each holder
of
record (at the close of business on the business day next preceding the day
on
which notice is sent) of the Series B Preferred Stock, at the address last
shown
on the records of the Corporation for such holder, (i) notifying such holder
of
the redemption to be effected, the Redemption Date, the Redemption Price,
the
place at which payment may be obtained, (ii) calling upon such holder to
surrender to the Corporation the manner and at the place designated the holder’s
certificate or certificates representing the shares to be redeemed (or lost
stock affidavits therefor reasonably acceptable to the Corporation) and (iii)
including the officers’ certificate described in Section 15(e) (the
“Redemption
Notice”).
Except as provided herein, on or after the Redemption Date each holder of
Series
B Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing the shares of Series B Preferred
Stock
to be redeemed (or lost stock affidavits therefor reasonably acceptable to
the
Corporation) (the “Redeemed
Certificates”),
in
the manner and at the place designated in the Redemption Notice, and thereupon
the Redemption Price of such shares shall be payable to the order of the
person
whose name appears on such certificate or certificates as the owner thereof
and
each surrendered certificate shall be cancelled. The Corporation will promptly
prepare and send to each such holder a certificate for any shares of Series
B
Preferred Stock represented by a Redeemed Certificate that are not redeemed
on
such Redemption Date.
(c) From
and
after the applicable Redemption Date, unless there shall have been a default
in
payment of the Redemption Price, all rights of the holders of shares of Series
B
Preferred Stock designated for redemption in the Redemption Notice as holders
of
the Series B Preferred Stock (except the right to receive the Redemption
Price
without interest upon surrender of their certificate or certificates) shall
cease with respect to the shares designated for redemption on such date,
and
such shares shall not thereafter be transferred on the books of the Corporation
or be deemed to be outstanding for any purpose whatsoever.
(d) For
avoidance of doubt, the Series B Preferred Stock will continue to have its
conversion rights pursuant to Section 4 until the Redemption Date.
(e) As
a
condition to the Corporation’s right to cause a redemption under this Section
15, (i) the Corporation must, on the Redemption Date, have funds legally
available for the redemption of the Series B Preferred Stock designated for
redemption, (ii) the Corporation must be able to effect such redemption without
violating or conflicting with any agreement to which the Corporation is a
party
or by which it or its assets are bound or the Corporation’s Articles of
Incorporation or bylaws, (iii) the Corporation must deposit the Redemption
Price
of all the outstanding shares of Series B Preferred Stock with a bank or
trust
corporation having aggregate capital and surplus in excess of $50,000,000,
as a
trust fund for the benefit of the respective holders of the Series B Preferred
Stock, with irrevocable instructions and authority to the bank or trust
corporation to pay the Redemption Price for such shares to their respective
holders on or after the Redemption Date upon receipt of notification from
the
Corporation that such holder has surrendered a share certificate to the
Corporation pursuant to this Section 15 (or lost stock affidavit therefor
reasonably acceptable to the Corporation) and (iv) include in the Redemption
Notice a certificate signed by the Chief Executive Officer and Chief Financial
Officer of the Corporation that the conditions set forth in this Section
15(e)
have been satisfied in full. As of the Redemption Date, the deposit shall
constitute full payment of the shares to their holders, and from and after
the
Redemption Date the shares so called for redemption shall be redeemed and
shall
be deemed to be no longer outstanding, and the holders thereof shall cease
to be
shareholders with respect to such shares and shall have no rights with respect
thereto except the right to receive from the bank or trust corporation payment
of the Redemption Price of the shares, without interest, upon surrender of
their
certificates therefor (or lost stock affidavit therefor reasonably acceptable
to
the Corporation). Such instructions shall also provide that any moneys deposited
by the Corporation pursuant to this Section 15(e) for the redemption of shares
thereafter converted into shares of the Corporation’s Common Stock pursuant to
Section 4 hereof prior to the Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any moneys deposited
by the Corporation pursuant to this Section 15 remaining unclaimed at the
expiration of thirty (30) days following the Redemption Date shall thereafter
be
returned to the Corporation upon its request expressed in a resolution of
its
Board of Directors, provided the Corporation has used commercially reasonable
efforts to notify the holder of the related Series B Preferred Stock of the
unclaimed amount and such holder’s rights therein.
13
IN
WITNESS WHEREOF,
Airspan
Networks, Inc. has caused this Articles of Amendment to the Articles of
Incorporation to be signed by Xxxxx Xxxxxxxx, its Chief Financial Officer,
as of
[insert
date of execution],
2006.
| AIRSPAN NETWORKS, INC. | |||
| By: | |||
|
Name: Xxxxx Xxxxxxxx |
|||
|
Title:
Chief Financial Officer
|
14
